Money, Reality, and Value: Non-Commodity Money in Marxian Political Economy

Transcription

1 University of Massachusetts Amherst Amherst Open Access Dissertations Money, Reality, and Value: Non-Commodity Money in Marxian Political Economy Joseph Thomas Rebello University of Massachusetts Amherst, Follow this and additional works at: Part of the Economics Commons Recommended Citation Rebello, Joseph Thomas, "Money, Reality, and Value: Non-Commodity Money in Marxian Political Economy" (2012). Open Access Dissertations This Open Access Dissertation is brought to you for free and open access by Amherst. It has been accepted for inclusion in Open Access Dissertations by an authorized administrator of Amherst. For more information, please contact

2 MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY A Dissertation Presented by JOSEPH T. REBELLO Submitted to the Graduate School of the University of Massachusetts Amherst in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY September 2012 Economics

3 c Copyright by Joseph T. Rebello 2012 All Rights Reserved

4 MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY A Dissertation Presented by JOSEPH T. REBELLO Approved as to style and content by: Stephen A. Resnick, Chair Richard D. Wolff, Member Agustin Lao-Montes, Member Michael Ash, Department Chair Economics

5 ACKNOWLEDGMENTS In many of the pages that follow I argue that a particular type of essentialism has hindered monetary thought. It is difficult not to consider the anti-essentialist overdeterminist orientation of this dissertation when attempting to acknowledge the essential individuals I am indebted too. If I wanted to be especially clever, in a predictable fashion, I might even meditate on the relationship between intellectual and monetary debts. Don t worry. I won t. As for overdetermination, thinking about intellectual indebtedness is one of those cases where it not only makes philosophical, but also practical, sense. I have yet to encounter a person or idea that hasn t influenced me. I can imagine some teachers who might be horrified with what I have done with their inspiration, but such is the nature of the dialectic. There are, of course, some hegemonic figures that I want to mention. First, and foremost, is Julie Graham. To those who knew her, there is really nothing I need to say. To those that didn t, I doubt my ability to explain. The academy can be a cruel and bitter place, yet Julie was a constant force of truly joyful intellectual surplus. There is a set of wonderful transformative ideas that can withstand serious intellectual challenge, but also invite superficial attacks and dismissals from defenders of archaic orthodoxies and the hyper-masculine gladiators of ideology. I must confess to worrying too much about one might say about me. I m not sure if Julie had similar worries, but if she did they did not constrain her. I wish I could say that I was more successful in living up to her example. Agustin Lao-Montes was generous in joining this eclectic dissertation project late. I was incredibly lucky to find a scholar with such diverse expertise, who likely knows most of the varied literatures I engage with better than myself. iv

6 If Richard Wolff and Stephen Resnick can share an office for decades, they can share a paragraph here. This dissertation would be impossible without their work. There is little chance I would have had these ideas. There is an even smaller chance I could have linked these ideas together. There is no chance I would have received so much support in exploring them. This applies to everything in this dissertation, but particularly so with my emphasis on Marxian theory. On numerous occasions I wanted to take a detour around the problems I saw in the Marxian theory of money, focusing on the history of monetary thought elsewhere. That hesitancy was intellectual cowardice, and I owe them both greatly for encouraging me not to give in to it. Of course, their influence extends well beyond this dissertation. I first read their work as an undergraduate struggling tremendously with a series of false oppositions (Marxism or Poststructuralism; Rationalism or Empiricism; Social Theory or Economics) they helped me reconcile or leave behind. They are also, in almost comically different fashions, talented and devoted teachers I always keep in mind when working on my pedagogy. I am also indebted to their many students and collaborators for providing the epistemic conditions of existence for this dissertation. I never imagined becoming an economist after my first course in the subject. I owe Richard McIntyre of the University of Rhode Island for presenting a much better example of what economics could be. More generally I want to thank the faculty in Political Science, Economics, and the Honors Program. I went to the University of Rhode Island due to the accident of being born a Rhode Islander, but in retrospect I m incredibly grateful I didn t end up anywhere else. The other students of URI s Honors Program made an indelible mark on my thinking. Sometimes given dirty looks by our classmates within our majors for general nerdiness, the Honors Program computer lab was a refuge of interdisciplinary fun, despite that broken window covered with cardboard. I trust the program s fancier new location has not crowded out the intrinsically motivated intellectual community I once enjoyed. v

7 My partner, Özlem Göner has lovingly dealt with me through intellectual and emotional lows. She has helped me persevere despite my self-undermining tendencies, and when the world seemed just way too absurd she was my nation of two, in the words of Kurt Vonnegut. Before Özlem relieved the world s burden of dealing with me, I had numerous housemates throughout graduate school. The Economics Graduate Student Organization at UMass provided a cooperative environment almost inconceivable in the academy. During my first years of graduate school, the participants in the Subjects of Economy project and Julie Graham s research seminars provided me with the perfect combination of challenge and encouragement. I m fittingly putting the final touches on these acknowledgments at the Haymarket Cafe in Northampton, Massachusetts. There is significant labor turnover in the food industry, and I don t recognize everyone here now, but for many years this was my office away from office. I m very grateful to those who have worked here over the last decade. Similarly, I must thank the workers at the PVTA and Earthfoods for essential bus transportation and lunch, respectively. All of the staff in the Economics department assisted me greatly. Tony Guglielmi and Judy Dietel were both wonderful people and extraordinary characters. They are missed tremendously. I feel less like an academic than an emotional Grammy or Oscar winner now. There many names I d like to name. So many, indeed, that I can t name them. Be assured that if you could imagine possibly being one of those names, you most definitely are. Finally, my parents, Joseph and Sandra, worked unimaginably hard to provide me with opportunity and happiness. They were patient when I made seemingly bizarre decisions with the options they had given to. When I was very young I thought I d play in the NBA and buy them a big house. In that sense, I m sad to only be able to offer a big dissertation, but I do trust they are happy for me nonetheless. vi

8 ABSTRACT MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY SEPTEMBER 2012 JOSEPH T. REBELLO B.A., UNIVERSITY OF RHODE ISLAND Ph.D., UNIVERSITY OF MASSACHUSETTS AMHERST Directed by: Professor Stephen A. Resnick My dissertation offers an advancement of the Marxian theory of money, motivated by a methodological critique of monetary theory in general. As such, my dissertation is located within the philosophy and methodology of economics and the history of monetary thought, in addition to Marxian political economy. This intermingling of fields reflects both my research interests and my argument with respect to the current state of scholarship on Marx and money. Despite increasing acceptance of the compatibility of non-commodity money and Marxian political economy, a dualist social ontology has stunted attempts to theorize the relationship between money, value, and class. I base my development of a Marxian theory of money in a rejection of this dualism. In other words, I contribute a theoretical analysis of the relationship between money, value, and class informed by a critique of these dualist notions of economic reality. Accepting criticism, leveled by Keynesians among others, of the tendency to reduce money to the status of a mere veil, I further argue that the ontological privileging of a vii

9 real economy over its monetary moments is prevalent across time and paradigms. This dichotomy between real economy and less-real money, which I call the realist dualism, is thus more general than the classical dichotomy. As such, even fervent opponents of the classical dichotomy may reproduce their own ontological dualism between the real and merely monetary. After outlining the basic features and theoretical consequences of the realist dualism, I present examples of how this philosophical tendency shapes monetary theory and debate, both ancient and modern. Within the Marxian tradition, dependence on such a dualism has impeded attempts to theorize money in its relation to both (1) the economy in general and (2) its own manifold forms and functions. The distinction between real and less-real on a macroeconomic scale is repeated within the conceptualization of money itself, privileging real commodity money over symbolic and imaginary forms. I provide an alternative to this tendency, based on an overdeterminist understanding of the relationships between so-called imaginary, symbolic, and real/material aspects of money. This alternative ontology informs a critical and deconstructive reading of money within the Marxian tradition and a reframing of the problem of non-commodity money. In lieu of deriving a theory of non-commodity money from a logically and historically privileged notion of real commodity money, my general Marxian theory of money takes as its object the interaction between (1) the imaginary, symbolic, and real/material dimensions inherent to money in general and (2) class processes of value production, appropriation, and distribution. This project accepts that a specifically Marxian theory of money is not produced from the logic of supposedly real commodity money, but through the entry point of class. viii

10 TABLE OF CONTENTS Page ACKNOWLEDGMENTS iv ABSTRACT vii LIST OF TABLES xii LIST OF FIGURES xiii CHAPTER 1. INTRODUCTION: MONEY, ONTOLOGY, MARX Real Economy Dichotomy and Dualism Repetition, Dualism, and Philosophy Marxian Monetary Theory Dissertation Outline THE REALIST DUALISM IN MONETARY ECONOMICS Introduction: The Philosophy of Monetary Economics The Realist Dualism as Problematic? The Language Metaphor: Competing Models of Money and Reality Semantics and Pragmatics Semiotics of the Coin Aristotle on Money Dualism and Macroeconomics, or, The Rigidity of Rigidity Modigliani s Classical Models New Classicals Conclusion ix

11 3. MARX AFTER THE LETTER: OVERDETERMINISM AND REAL MONEY Introduction: RIS Popular Monetary Education Outline Tensions in Marx s Real Money The Insistence of the Real The Money-Form Wildest Theories: The Measure of Value The Honesty of Paper Money: The Means of Circulation Return of the Real: Money as Money Essentialist and Anti-Essentialist Critique Monetary Essentialisms and The Realist Dualism Monetary Essentialism and Marxian Theory Monetary Anti-Essentialism and Overdetermination Lacan, Money, RIS Goux s Marx and Lacan A Simple Outline of the Lacanian RIS Three Registers Complication I: Before and After the Letter Complication II: The Knot A Marx-Lacan Framework for Monetary Theory RIS Money (Non)Commodity Money, After the Letter MARXIAN ECONOMICS AND NON-COMMODITY MONEY Introduction Money and Moonlight: Hilferding Against a Marxian Theory of Non-Commodity Money For a Marxian Theory of Non-Commodity Money Conclusion: Overdeterminism and Non-Commodity Money x

12 5. THEORETICAL GOLDEN FETTERS: THE PERSISTENCE OF COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY Introduction: Real Gold Commodity Money Forms of Money/Value Price Forms, Plural If commodities could speak Gold, Value, and Output What makes a monetary theory Marxian? Measurement and Theory Positing/Presupposing The Value of Money The Process of Equalization Overdetermination and Equalization Overdetermination without Equalization Conclusion: Money in General CONCLUSION: NON-COMMODITY MONEY AND CLASS ANALYSIS Introduction: Reviewing the Questions and Answers The Real-Imaginary-Symbolic, Monetary Functions, and Monetary Forms Class and Non-Class Processes in a Monetary Economy Monetary Conditions of Existence A Simple Class Analysis of a Commodity Money Economy A Simple Class Analysis of a Non-Commodity Money Economy Class, Bank, and State Flows Class Analysis of the Value of Endogenous Money Extensions Money, Contradiction, and Crisis BIBLIOGRAPHY xi

13 LIST OF TABLES Table Page 1.1 The Realist, and Other, Dualisms Aristotle s Dual Economies Goux s Registers xii

14 LIST OF FIGURES Figure Page 1.1 Real and Monetary in the Fisher Hypothesis Modigliani s Keynesian and Classical Models as of Imaginary and Real Conditions of Symbolic Money Borromean Rings RIS, Money, and Value The Priority of Gold Prices in Determining Non-Commodity Money Prices xiii

15 CHAPTER 1 INTRODUCTION: MONEY, ONTOLOGY, MARX 1.1 Real Economy The ongoing economic crisis that began in 2007 goes by many names. Alongside the naming of the crisis is the identification of what is in crisis and why. For some it is a subprime crisis - a crisis created by a particular set of markets related to real estate. For others it is a crisis of a particular form of capitalism. For example, as a crisis of neoliberalism we are suffering from an excess of capitalism (defined largely as free markets and private property) and deficit of government intervention. Not surprisingly, others have made the exact opposite case, arguing the conditions and triggers of this crisis stem from too much government meddling. Alternatively, this event can be seen as a crisis of capitalism itself. The various merits and consequences of these approaches to crisis are important, but not of interest here. What is salient is the tendency, not universal but common, to present (1) the causes of the crisis as an undermining of some economic real and (2) the solution as a return to this real. The specific nature of this real economy varies quite widely across political economic frameworks. The characterization of the less-real varies as well. Depending on who you speak to, the enemies of this reality include Wall Street, finance, banks, the federal government, financial derivatives, (de)regulations, the Federal Reserve, unbacked paper money, China s purchasing of US bonds, the poor, and minorities with (improved) access to credit. In each case, in their own way, these ideas, actors, or activities are deemed less real. In some cases they represent deviations from the natural laws of the real economy. In others, they are deviations from a real America or 1

16 processes detached from brute reality of industrial production. However specified, the economy is represented as having real and less-real moments. The real is privileged, and the less-real exists as a potential threat or servant. The economy does well when real and less-real moments, process, agents, or sectors know and play their appropriate roles. One expects that a motivating factor for the use of a rhetoric and logic of the real economy is the apparently natural, obvious, and matter of fact character of that which is real. On the other hand, the multiplicity of ends the real economy rhetoric is used for suggests there is really nothing straightforward or uncontroversial about the matter. As the dualism between real and less-real, at once philosophical-methodological but also quite political (there is nothing auspicious about being deemed a threat to reality itself during times of social upheaval), overdetermines popular political discourse, it is also at work within the academic realm of economic theory. Given the frequency with which money has been thought of in opposition to some real economic thing, this dualism is featured prominently in the history of monetary thought. And while the philosophical-methodological dimensions of the dualism are most explicit in earlier economic thought, they continue to overdetermine the discourse of modern and so-called analytical monetary theory to this day. In both the popular and academic worlds, this dualism comes in many varieties but nonetheless places its stamp on its discursive products. It is without doubt productive of theories, narratives, and proposed solutions to economic problems, but also forecloses alternatives based on (1) a critical evaluation of the supposedly real economy and (2) a serious analysis of the ways in which the processes located on each side of the presupposed ontological border are articulated together, overdetermining each other without causal priority. Because money is less real than the real economy, and non-commodity money is often represented as less real than commodity money, the object of this dissertation is on exceptionally shaky ontological grounds - a fake of a fake. This philosophical 2

17 debasement suffered by non-commodity money goes a long way in accounting for its status as a problem for Marxian theory. The solution to this problem resides neither in sensationalism over the fictitiousness of modern money, nor in anchoring these fake forms of fiat and credit in the sure ground of an idealized notion of real gold commodity money. This dissertation advances an overdeterminist Marxian theory of non-commodity money by abandoning this realist dualism. As I will argue, this abandonment opens new paths for theorizing non-commodity forms of money. What presented itself as a difficulty, perhaps even fatal, for Marxian economics becomes yet another process to which a class analysis can be applied. Attempting to leave this realist dualism behind is not necessarily easy. In theoretical, pedagogical, and political practice the distinction between the really real and not-so-real is often attractive on a number of grounds. This dissertation argues that resisting these temptations pays dividends in advancing monetary theory within a Marxian framework. My inclination is to say that the same benefits accrue in the context of representing and responding to economic crisis. 1.2 Dichotomy and Dualism One familiar element of heterodox economics (as well as some mainstream Keynesian economics) is the theoretical and empirical implausibility of any approach in the classical dichotomy, real analysis, and monetary neutrality traditions. 1 For some heterodox and Keynesian economics, the only interesting question such literature poses concerns how someone intelligent could accept it. I have no desire to defend the clas- 1 The classical dichotomy posits a real and a monetary part of the economy in which the latter has no causal influence on the former. A result of this dichotomy is the neutrality of money. Changes in the supply of money have no influence on real values, so economists would do well to ignore this lessreal part of the economy. This bracketing of money is the essence of real analysis. These concepts work well together but should not be conflated. First, they operate at different methodological levels. Second, one may find money to be neutral in the medium to long run but resist the methodology of strict real analysis. 3

18 sical dichotomy or monetary neutrality, and if I did this is not the place. The concern I do have about this familiar critique is that in its matter-of-fact familiarity it misses something. What it misses is the dualism between money and real economy common across paradigms, of which the strict dichotomy of only one variant. While the latter (dichotomoy) is a frequent object of critique, the former (dualism) is very rarely interrogated. Indeed, it has been my experience that when I tell economists what I do their first impression is to read dualism as dichotomy. It is therefore important to differentiate the two. Smithin offers a very concise summary of the orthodox approach to money: This standard view of money, that is as primarily a technical device for overcoming the inefficiency of barter, leads on naturally to the characteristic dual perspective on the relationship between money and macroeconomic theory. Although the existence of money is accepted (seeming somewhat grudgingly) as part of the background of economic institutions, monetary changes within a given framework are still regarded as neutral (Smithin, 2003, p.20). This description of the standard approach to money should ring familiar to most economists, regardless of its accuracy or fairness to macroeconomics. The history of monetary thought has been dominated by conflicts over the qualitative and quantitative importance of money. As Smithin points out, there is a link between questions concerning money s ontology, functions, and relationship to greater economy. 2 In particular, the neoclassical emphasis on money as a means of exchange produces a dual perspective. On one hand, money is assumed to exist because monetary exchange 2 What is money? What does money do? What effects do monetary processes have on the economy? Answers to these questions tend to condition one another. 4

19 is more efficient than barter. On the other, it is assumed that its effects are neutral and can therefore be assumed away. While Smithin may not have intended anything more than this pair of theoretical positions by using the term dual, those who have thought about the tradition of monetary neutrality may recognize that it is based on a dualist vision of the economy. A dualist economy is one comprised of two qualitatively different parts, sectors, or types of processes. The most famous example outside of economics is likely found within the philosophy of the mind, in which a dualist position asserts that the body and the mind are ontologically distinct. Competing dualisms seek to explain the nature of both the divide and interaction between these separate entities. Why and how are the mind and body distinct? As distinct, how do they relate to one another? What explains harmony or disharmony between the two? Does one dominate or determine the other? Analogous questions are implicitly addressed in the dualist vision of orthodox economics. The math and logic of the Fisher Hypothesis (1907) can illustrate how they are approached and resolved. An exceptionally simple theory, it is therefore also a very straightforward example of how economic theory may contain a specific social ontology, even in the familiar forms we take for granted. The hypothesis is typically expressed as: r = i π e (1) where r is the real interest rate, i is the nominal interest rate, and π e is expected inflation. The equation itself defines/constitutes a distinction between real and nominal. Indeed, this distinction and definition is now taken for granted as natural and obvious. 3 The nominal rate is the real rate plus an inflation rate. Or, the real rate is 3 For a critique of this real interest rate notion see Tymiogne (2006). 5

20 the nominal rate with the inflation rate subtracted from, or accounted for. Implicit, even in this very straightforward math, is a vision of the economy with a real foundation and nominal appearance. Removing, or subtracting, the distortion of inflation we can see the real economy. 4 Moving beyond the equation, the hypothesis itself offers a theory of the interaction between the real and the monetary. It states that a change in expected inflation is offset by a corresponding change in the nominal interest rate, leaving the real rate unchanged. Changes in a real value (r) can influence nominal values (i), but a monetary or nominal change leaves the real rate unchanged. 4 This is in line with the idea that money is a veil. A veil hides one s face, but we assume there is indeed a real true face beneath. The metaphor has typically been deployed in accordance to the method of real analysis. To maintain the metaphor, the object of the serious economist is the face (real economy) itself, and not the mere veil (monetary phenomena). Knowledge of the veil itself, like a method for calculating inflation, is useful only in that it allows us to correct for its distorting effects. On the not entirely clear origins of the veil metaphor, see Patinkin and Steiger (1989), Laidler (1990), and Klausinger (1990). Note that there is a tension in the veil metaphor. While it does imply a real, independent face - the wearing of a veil changes one s appearance but not actual face - it is also true that in practice the wearing of a veil is far from a neutral social act. Hawthorne s short story, The Minister s Black Veil, illustrates the social non-neutrality the mere donning of a veil may entail. This ambiguity in the veil metaphor was recognized by Pigou. His statement on the trope begins in agreement with the metaphor: Over and against the real facts and happenings thus roughly outlined there stand monetary facts and happening (1949, p.24). However, despite the fact that money does not comprise any of the essentials of economic life he also argues that one can not maintain that monetary facts and happenings are unimportant to economic life (ibid., p.25). He offers two methodological solutions to this tension. The first, more conservative resolution, is to distinguish between the institution of money (which is important) and the number of units of money (which is not) (ibid., p.26). In this case it is important to recognize that money does in fact exist, but in practice its quantity and the various relationships and processes related to it can be left aside. His second suggestion is a more a radical deviation from the spirit of the veil metaphor that approaches a notion of the performative: Besides these induced changes that occur in the garment [or veil] there are, or may be, other changes that are autonomous, originating in the garment itself. These too have effects on the body (ibid., p.27). 6

21 Figure 1.1. Real and Monetary in the Fisher Hypothesis Real r i M S π e This basic logic is presented in Figure 1.1. Entry points are distributed into the categories of real (essential) and monetary (inessential). Fisher placed importance on the marginal productivity of investment as a real component, but various orthodox approaches to the real interest rate can also include other standard (real) entry points such as preferences and endowments (Wolff and Resnick, 1987, Ch.2). In this orthodox approach to the interest rate, real entry points are sufficient to determine the real rate of interest. Given these real entry points, an exogenous (and typically arbitrary) quantity of money, and rational subjects the (expected) inflation rate can be determined. Note that while real entry points influence this nominal value, the determination is one-way. Finally, the strictly real interest rate and the real-monetary inflation rate determine the nominal interest rate, according to equation (1). So far we have described a very orthodox version of this dualism that follows the the logic of the classical dichotomy. However, as I ve suggested above, we err in conflated the dichotomy as a particular type of dualism with the dualism itself. What I call the realist dualism is not the strict dichotomy governing the the causal priority of real and monetary processes or values, but the initial ontological distinction between the two in the first place. In terms of Figure 1.1, one may alter the direction or increase the number of arrows and still maintain an ontological gap between the ultimately 7

22 real and merely monetary. 5 I argue that the particular dualism found here is just one variety of a more general methodological-philosophical tendency found across many economic paradigms. I refer to this tendency as the realist dualism because it operates through a distinction between real and less real economic processes or variables. Even the discourse of traditions that emphasize the importance of money nonetheless often do so through language and reasoning premised upon a dualism between the real and the less-real. The textbook Keynesian critique of the classical dichotomy is premised precisely on such a dualism. The difference between classical monetary neutrality and mainstream Keynesian non-neutrality is that in the latter case a market imperfection (i.e. wage rigidity) creates a short circuit between the two spheres. This short circuit is only intelligible given the presupposition of a dualist economy in the first place. 6 This is not to say that critiques of the classical dichotomy, found in mainstream Keynesian, heterodox, or Marxian economics, do not contain moments in which the dualism itself is undermined. However, because the dichotomy has been the primary object of critique, the treatment of the dualism has been uneven at best. For example, in the broader Keynesian tradition the critique of the notion of self-contained real economy of classical economics has existed alongside their own ideal of an economy in which the monetary-financial sector acts as a mere servant to the real economy. As this dissertation will show, Marxian economics has also approached the dualism and dichotomy with mixed results. For example, it is not uncommon for the Marxian discourse to vacillate between (1) a position of utter disdain for monetary neutrality when speaking about crisis and (2) its own very strict monetary neutrality assumption on the topic of money and value. In the context of the first case, the Marxists 5 These revisions may open up the possibility of an overdeterminist critique, but the opportunity is not taken. In my reading both the Keynesian and Marxian traditions contain moments in which this dualism is seriously challenged, only to be built back up. 6 This point is made in greater detail in Chapter 2. 8

23 have produced forceful denunciations of the ontological bracketing of the monetary. In the second, a very strict dualism approaching the classical dichotomy variant is presupposed in order to theorize the value of (non-commodity) money Repetition, Dualism, and Philosophy Scholars of the history of monetary thought have often commented on the repetitive character of debates over theory and policy. In a recent book Patnaik (2009) groups all monetary thought into the schools of monetarism and propertyism. Whatever novelty is produced, debates are ultimately reducible to a struggle between these two sides. Mehrling (1998) discusses the development of American monetary thought as a reshuffling of particular positions oriented around the central question as to whether money or banking is taken as the starting point of analysis (p. 294). In each case, the practice of monetary theory repeats itself around a central opposition. Lenin (1970) accounts for the repetition of philosophy through the opposition between materialism and idealism. Idealist and materialist approaches, at least in their crude forms, both share a dualistic view of the world. In each case, ideal and material moments are assumed, and debate surrounds the priority and relationship between the two. As Althusser explains this thesis: Besides, that is what Lenin suggests in practice, when...he explains that Mach merely repeats Berkeley, and himself counterposes to this his own repetition of Diderot. Worse still, it is clear that Berkeley and Diderot repeat each other, since they are in agreement about the matter/mind opposition, merely arranging its terms in a different way. The nothing of their philosophy is only the nothing of this inversion of the terms in an immutable categorial opposition (Matter/Mind) which represents in 7 Again, these are topics which will be dealt with in more detail in the dissertation. 9

24 philosophical theory the play of the two antagonistic tendencies in confrontation in this opposition. (1977, p.55) There is a striking similarity in the ways in which monetary theory and philosophy repeat. In a repetition of Althusser on Berkeley and Diderot, we could say that the classical and Keynesian models are in agreement about the real/monetary opposition, merely arranging its terms in a different way. This shared dualism is important because it helps explain both similarity and difference. On one hand, it explains why certain problems reappear and why members of competing traditions may be able to speak to each other in a shared language. 8 On the other hand, since different traditions interpret the particular nature of the common dualism in their own way, they struggle. Within the context of this dissertation, this logic of repetition related to a shared methodological-philosophical dualism is important on two accounts. First, as this dissertation engages with the history of thought an understanding of this logic helps us understand the contours of incessant monetary debate and partial resolution. Second, and perhaps more importantly, since this dissertation seeks to advance a Marxian theory that breaks from this essentialist dualism and the repetition it nurtures, I m interested in understanding so as to produce something different. One complication that arises is that the dualism I critique is not the essence of economic discourse. In the accounts of Patnaik, Mehrling, Lenin, and Althusser an implication is made that the opposition they discuss is the central and fundamental one. While I focus on the opposition between the real and monetary, in part because of its rhetorical and theoretical importance in representations of money, it never exists alone and is itself overdetermined by various other oppositions and dualisms. 8 For example, New Classical and New Keynesians may both express their basic positions through IS-LM/AD-AS frameworks, representing their differences through competing constructions of aggregate supply (AS). 10

25 A return to the simple Fisher Hypothesis can illustrate this point. As I described, a notion of the real and monetary (or nominal), as well as a relationship between the two, is presented by this theory. Once we begin to describe this relationship we begin to use a variety of other oppositions. Because expectations play an important role, a difference between the actual and the expected enters. This brings us to the question of the production of expectations and now we are confronted with the classic social science dualism of agent/structure (Cullenberg (1988), Charusheela (2005), and Madra (2007)). Furthermore, when we characterized the real and the monetary we made reference the opposition between the necessary and the contingent (DeMartino, 1992). When we deal with this hypothesis empirically other dualisms appear. Is this a long run or a short run relationship? In order to really make sense of the real interest rate and the nominal, we have to rely on all of these related oppositions. Economic literacy concerning the real involves being able to speak about the ways the nominal may deviate from the fundamentals in the short run, if agents form expectations non-optimally, or if markets fail - but in the long run, the real will necessarily assert itself. This long run outcome is one of order and harmony. At the heart of this long run reconciliation of the nominal and the real is an orderly world (Ruccio and Amariglio (1998), Ruccio and Amariglio (2003, Ch.1)) in which any apparent disorder or disharmony - between expectations and actual values, price signals and optimal investment decisions, individual and social optimal outcomes, etc. - is resolved. Many of these dualisms are gendered (Barker, 1998) as well. In some cases this involves use of implicitly gendered language and metaphors to distinguish the really real from the monetary. In other cases, the issue is made explicit and social practices surrounding the monetary-financial are associated with women. Ingrassia (1998) and de Goede (2005) outline the ways financial speculation, particular after things have gone bad, has historically been gendered as feminine, and a threat to the masculine 11

26 realm of real economic activity. Racial, ethnic, and religious identities have also helped constitute the dualist ontologies of popular monetary thought. 9 Table 1.1. The Realist, and Other, Dualisms Real or Monetary necessary contingent long run masculine rational stable essence nature active real short run feminine irrational volatile appearance convention passive less real Table 1.1 is far from exhaustive. It also doesn t represent all manifestations of dualist thought since different traditions approach these oppositions in different fashions. Sometimes some of these key terms are reversed. For example, in some progressive Keynesian accounts of the current crisis, monetary and financial factors are given a very active and primary role - they are said to have caused to crisis. This agency is far from the orthodox dualism in which money and finance are largely passive, but it is not necessarily a departure from the realist dualism. I read it rather as a particular take on this dualism in which the monetary is scapegoated in defense of the real economy. The agency afforded to it, allows the real to continue to be privileged as a source of order. 9 Shell (1982, Ch.3) reads Shakespeare s The Merchant of Venice to show the ways in which the ontological questions of money and credit are approached the binary opposition of Christianity- Judaism. Natural and monetary modes of reproduction/generation are mapped onto the dual worlds of Christianity and Judaism, materiality and spirituality, commerce and love, and so on. 12

27 While not comprehensive, the table suggests ways in which these oppositions mutually constitute one another. It also helps explain why dualisms come in varieties. Modifying the character of one opposition will overdetermine all of the other relationships. So, while a language of the real versus the monetary reoccurs with regularity over time, its specific content is heterogenous and unstable. This overdetermination should be kept in mind throughout the dissertation. Given the constraints of space and language, my discussions of the dualist character of monetary thought will not account for this complexity. Although I will primarily focus on the language of the real, lessons from the analysis of these other dualisms shape my approach throughout. Without granting it a priority I have withheld from the other dualisms, the distinction between order and disorder plays an interesting role. I did not include it in Table 1.1, although it could certainly fit. For example, current popular thought on the economy may locate order in the the real economy (Main Street) and disorder in the monetary or financial sector (Wall Street). However, I find the dis/order notion more useful in thinking about the different relations between these dualisms. In other words, the characterization of the economy through a series of oppositions (agents/structures, production/finance, etc.) often implies the possibility of order understood as a harmonious relation between these terms, and the possibility of disorder understood as dissonant relationships. Because the dualisms themselves shape what harmonious or dissonant relations would be, the tendency for the realist dualism to privilege the real produces a particular vision of order as the priority of the real, and disorder as the subversion of the real by the monetary. 1.4 Marxian Monetary Theory It is not uncommon for Marxian theory to be characterized as deficient in its development of theories of money and finance. Oftentimes this has been the product 13

28 of a casual reading of the Marxian tradition that ignores the concern for monetary and financial topics, and accepts the stereotype of a singular focus on industrial production. Certainly productivism has been a problem for Marxian theory in general, and its treatment of money in particular. This is a central part of my dissertation. However, the extent and nature of this problem has often been exaggerated by critics who act as if Marx and Marxists have been completely silent about matters outside of industrial production. 10 Another issue I have found in the appraisal of Marxian theories of money and finance is that the frequency with which Marxists write on money is not matched by a frequency of citing the work of others. The biggest surprise of my research was how much Marxists have written on money. While this should not be taken as a stamp of approval of all this literature - a critical survey will be provided in the dissertation - it needs to be recognized to be evaluated. I take these defenses of Marxian research on money as important qualifications to be made prior to an outline of its problems. The Marxian theory of money does indeed have problems, just as other theories, both orthodox and heterodox, continue to stumble over monetary questions. The claim that work remains to be done on Marxian monetary theory should be carefully kept separate from the notion that Marxists have more difficulty with money than others. 11 These qualifications aside, this dissertation 10 Dodd (1994) is an excellent example. He has the insight to see the sociological character of Marx s work on money and I agree that productivism is a problem. However, the assertion that the existence of present-day international currency and capital markets in which profit can be generated, and so money-capital expanded...undermine[s] any contemporary application of his theory is difficult to accept. If by generate profits we mean earn a return for the investor Marx was well aware of ways to make money outside of production. This is certainly not because Marx could see this future we call the present-day. Rather, the ability to earn profits (in the common sense of the term) from exchanging not only goods, but also currency or financial instruments, predates Marx significantly. If Marx/ists were unaware of this, he/they would be guilty of much worse than simple productivism. Indeed, it is the idea that this ability to make some money outside of production is somehow new which betrays a productivism - as if the caricature of Marx would have been applicable prior to Nonetheless, the suggestion that Marxian theory is superficially attractive, but no longer relevant given some novel historical development often manages to find traction. 11 It is ultimately meaningless to attempt to compare how much difficulty different traditions have with money, but I would assert that neoclassical economics, with its vertical money supply curve and Mengerian origin myth (1892), has no grounds to claim less difficulty. If I had to be 14

29 does seek to advance and improve upon what has been done. In particular, I m interested in developing the Marxian theory of money in a direction that addresses its non-commodity forms while incorporating the logic of overdetermination and class analysis. The history of Marxian research on money is studied in Chapter 4 and specific details are addressed in other chapters (see outline below). Here I would like to provide a stylized outline of the areas in which theoretical problems appear. Forms and Functions. How we do understand the different forms money may take? What are the relationships between these forms? What functions does money perform? How do these functions condition one another? Finally, what is the relationship between money s forms and functions? Non-commodity forms of money have traditionally been seen as less fundamental than real gold money. Similarly, functions associated with these less real forms are taken as derivative of the fundamental measure of value function. If we are to theorize non-commodity forms/functions as simply derivative, what is the logic of this derivation in historical and/or theoretical terms. If we are to reject this hierarchy of forms/functions from an overdeterminist perspective, how do we retheorize these relationships in an anti-essentialist fashion? Forms and Value. Within Capital, Marx initially develops a theory of money in his discussion of the forms of value. Because this theory of money assumes a particular form - a commodity - the labor theory of value that Marx produces has been seen as intimately linked to a type of money. A series of problems follow from this entanglement. If money takes a different form, what happens to value? If we see Marx s notion of value as a static concept produced at the beginning of Capital, trapped on a deserted island with only one account of money I would take Marx s. While a theory of money would do little good in such a circumstance, at least the theory I had would be able to account for its own circumstantial uselessness. In the strict neoclassical approach, the uselessness on the deserted island would just be a special case of the general insignificance of money. 15

30 does the unsettling of the money-form undermine the labor theory of value? 12 If we see value as a concept that is transformed through theoretical production (Roberts (1981); Wolff et al. (1994)), what is the character of the transformation of value associated with a change in the money-form? A Marxian Equation of Exchange. The standard equation of exchange relates the quantity and velocity of money with the level of prices and output. Economic theories ascribe different causal relationships between these variables, based on microeconomic behavioral assumptions, macroeconomic structural conditions, and/or institutional architecture. As with the theory of value, Marx s treatment of the relationship between these variables is closely linked to his theory of money. Of course, Marx deploys some notion of the structure of the economy, the character of economic institutions, and in a limited sense what we could individual behavior, but even here these concerns are articulated with the theory of money. Like the form of value, the question of how different forms of money condition different causal relationships between prices, money, and output is important. While Marx provided partial answers, these solutions are based on the strict assumptions of Volume 1, including predetermined levels of output, that are not accepted by Marxian theory in general. Furthermore, some theories of the value of non-commodity money (Moseley (2004), Carchedi (1991)) are built upon undertheorized presuppositions concerning the relationship between money creation, circulation, and production. Contrary to some approximations, much work, however uneven or limited, has been done on these topics. My dissertation contributes to this literature on two accounts. First, it is methodologically unique in that it applies the overdeterminist framework developed by the AESA school of Marxian economics to the problem of non-commodity money. Roche (1981; 1985; 1988) and Kristjanson-Gural (2008) have 12 For some examples see Lavoie (1983) and Cutler et al. (1978). As with all these theoretical problems, Chapter 4 will more exhaustively survey this literature. 16

31 both dealt with money within this framework but the emphasis was on its commodity form. Biewener (1994) does link an overdeterminist notion of socially contingent value to the possibility of non-commodity money and the overdetermination of value by monetary and financial processes. Nonetheless, a number of key monetary questions are not addressed and the character of this possibility and overdetermination are not fleshed out. The theory of non-commodity money, and even the theoretical distinction between different types of money (what do we mean by non-commodity or commodity money?), remains somewhat in limbo within this approach. Second, it will identify a number of limitations that exist within Marxian monetary theory in general. Although the specific theoretical solutions to these problems will be conditioned by the overdeterminist approach I adopt, they are nonetheless problems shared throughout Marxian economics. 1.5 Dissertation Outline Chapter 2 of this dissertation is a critical introduction to the realist dualism as an essentialist methodological-philosophical tendency in the analysis of money. What reoccurring conflict, between economists in the real analysis and monetary traditions for example, both implies and obscures are the methodological principles common to both sides. I argue that these common methodological tendencies are the product of a common social ontology - the realist dualism. After outlining the discursive characteristics and consequences of this realist dualism, I provide a few simple linguisticinspired models exemplifying its various manifestations. I then provide examples of the realist dualism in both early and modern monetary thought. In the case of Aristotle, I show how attention to his social-economic ontology clarifies the ambiguity surrounding his metallism. In a more recent, and less explicitly philosophical, case I consider the way in which the realist dualism within the macroeconomic tradition helps explain the centrality of rigidity in New Keynesian economics. 17

32 After the elaboration of the tendencies and some consequences of the realist dualism, Chapter 3 offers an alternative framework for the study of money. This alternative framework is informed by an overdeterminist reading of Marx on money. In Volume 1 of Capital Marx outlines multiple forms and functions of money, as well as the relationships between them. Many interpretations are possible, but traditionally his language of real, imaginary, and symbolic money has lent itself to an essentialist reading in which the real form/function strictly determines derivative forms/functions. I reread Marx s use of the real, imaginary, and the symbolic through Lacan s understandings of these terms. The particular Lacanian notion of the real (after the letter) does not only help us escape the essentialism of the orthodox reading, it also allows us to make sense of much of the nuances of Marx s argument. Chapter 4 provides a reading of money in the Marxian tradition informed by the methodological-philosophical concerns raised in earlier chapters. It will focus particularly on how a productivist variant of the realist dualism has overdetermined attempts to theorize various non-commodity forms of such as credit or fiat money. While productivism has been theoretically productive in its own terms, and the Marxian tradition also contains various postmodern moments in which the realist dualism has been undermined, subverted, and critiqued, I argue that a Marxian theory of money in general has been impeded by this social ontology. In some cases this failure has manifested itself as an outright rejection of the possibility of non-commodity money and Marxian theory. In other cases, the possibility of a Marxian theory of non-commodity money has been accepted, but has taken real gold commodity money as the true form of money from which others are derived. Chapter 5 focuses on this latter point in greater detail. In this case, the privileging of real gold commodity money as logically and historically prior produces a theory of non-commodity money as the absence of commodity money. The particular logic governing the relationships between money, value, prices, and output in the com- 18

33 modity case persists by treating non-commodity money as simply standing in for the former. This persistence can be subtle. For example, in some Marxian accounts of the relationship between prices and the quantity of money, the causality operative in a non-commodity money regime is obverse of that of the commodity money of case. Superficially, this reversal may appear as a break from the commodity money theory. However, consider a stylized account of the development of this causal argument: 1. In the case of commodity money, prices determine the quantity of money circulating. 2. Non-commodity money is not commodity money. 3. Therefore, in the case of non-commodity money, the quantity of money circulating determines prices. This account is of course very simplified, and misses some important details, but allows me to illustrate what I mean by the persistence of a gold commodity money logic. The theory of non-commodity money is the combination of (1) the theory of commodity money and (2) its strictly negative definition. The problem of the persistence of gold money logic is twofold. First, it hinders an analysis of the conditions of existence, and consequences, of non-commodity money. Second, it also impedes an understanding of commodity money itself because it takes an idealized case based on Volume 1 assumptions, absent contradictions and tensions. This is not to say that Marx s work on commodity is money is without value. Chapter 3 will have shown how his writings on real gold money itself undermine the idealized case. When discussing the way production conditions in the gold industry lead to monetary effects (changes in prices and the quantity of money), Marx suggests an ongoing process encompassing the production of gold, its moment of entrance into the economy, and uneven price movements that betrays the notion that the labor embodied in precious metals strictly determines (real) prices in any natural or 19

34 unmediated way. The specifics of Marx s argument will unpacked in the dissertation, but for now he can speak in his own words: We have already seen that the sphere of circulation has a gap in it, through which gold (or silver, or the money material in general) enters as a commodity with a given value. Hence, when money begins to functions as a measure of value, when it is used to determined prices, its value is presupposed. If that value falls, the fall first shows itself in a change in the prices of those commodities which are directly exchanged with the precious metals at their source. The greater part of all other commodities...will continue for a long time to be estimated in terms of the former value...which has now become antiquated and illusory. Nevertheless, one commodity infects another through their common value-relation, so that their prices, expressed in gold or silver, gradually settle down into the proportions determined by their comparative values. This process of equalization is accompanied by a continued increase in the quantity of the precious metals. (1976, p.214) This process of equalization is presumed for various reasons. In the context of Volume 1 assumptions of equal exchange this is not very surprising. However, once we relax these assumptions and consider the ways in which this process may fail due to contradictions and complexities, we are left with a very different theory. Instead of money, its constituting forces, and effects being reduced to one essence that is ultimately manifested, its multiple forms and functions overdetermine one another. It is this overdeterminist account of commodity money (one that undermines the idealized case) that can help us in constructing a theory of non-commodity money in the Chapter 6. In Chapter 3 I will argue that Marx views commodity money as important for the theoretical and political reason that it forces us to think about the production of commodities in class processes. Marx would criticize theorists who 20

35 emphasized the imaginary/symbolic aspects of money because they neglected class. In my reading what is unique to Marx on money is precisely class. Commodity money, as a product of a class process, provides a direct link. However, non-commodity forms are not somehow immune or beyond approach from a class analytic framework. Like commodity money, fiat and credit money must be created and inserted into the economy. Similarly, it will have uneven and complex effects on prices, values, levels of output, and the quantity of money in circulation. These various moments overdetermine each other across a variety of class, subsumed class, and non-class sites. In the case of gold, one of these sites is the fundamental class process in which the money commodity is produced. Absent this one particular site, in the case of noncommodity money creation occurs in subsumed or non-class processes, the moments that make up the economic life of money nonetheless include class processes that overdetermine its value. 21

36 CHAPTER 2 THE REALIST DUALISM IN MONETARY ECONOMICS But again at other times money seems to be a nonsense and altogether a thing of law and by nature nothing. - Aristotle, Politics I: 1257b5 Ultimately, philosophy has no history, philosophy is that strange theoretical site where nothing really happens, nothing but this repetition of nothing. - Althusser (1977, p.55) 2.1 Introduction: The Philosophy of Monetary Economics I once shocked an economist by claiming an interest in the philosophy of money. People still do that? This chapter is motivated by the idea that everyone still does that. In other words, philosophical concerns and assumptions, explicit or not, condition monetary thought. Whether we speak about money on the level of conversation, policy, or formal theory we rely upon a plethora of concepts such as nominal, real, natural, symbolic, and representation that all appeal to some discipline outside of economics. I refer to the study of the relationship between these more philosophical concepts and what is taken as analytic monetary theory as the philosophy of monetary economics. 1 In his Philosophy of Money, Simmel qualified his work as be- 1 The term philosophical is used in a very general sense here. I intend to include the ontological, epistemological, linguistic, semiotic, aesthetic, political, and various other fields through which the character of money is thought within this notion of philosophy. I use the term as a shorthand for this diversity for both practical ease and because historically, the philosophy of money tends to be broad in scope already. 22

37 ing strictly philosophical-sociological, and not a statement about economics (1991, p.54). Without necessarily accepting this claim I want to reject the possibility of the obverse. There is no doing economics without doing/using philosophy. Statements from the standpoint of economics, to use Simmel s language, are conditioned by philosophical standpoints as well. This chapter presents a critical analysis of the opposition between real economy and less real money that has long influenced economic thought. I argue that opposing this dichotomy on the level of formal theory or empirical evidence is insufficient because it misses its philosophical conditions of existence. One of the interesting aspects of the Monetarist-Keynesian confrontation was the debate within the debate over the actual nature of their disagreement. Friedman (1974) attempted to show that the conflict was of an empirical nature by adopting what some would consider a Keynesian framework. Tobin, and others, responded that there were significant theoretical dimensions to the debate. Without discounting the importance of either the empirical or formal-theoretical aspects, we gain further insight through an analysis of the philosophical-methodological contours of monetary controversies. Consider Tobin s attempt to get a handle on the object of debate: Friedman goes on to say that money is all that matters, period is a basic misrepresentation of our conclusions. When I [Tobin] tried to clarify the debate by distinguishing among the three propositions money does not matter, it does too matter, and money is all that matters, the context was perfectly clear. It was what matters in the determination of money income. In the same paragraph, money is all that matters is translated into the stock of money [is] the necessary and sufficient determinant of money income (Tobin 1965). There has been no basic misrepresentation...they have been represented as claiming exactly what 23

38 he now agrees gives the right flavor of our conclusions. (Tobin, 1974, 79n) Without untangling these different positions on the matter of money, this passage suggests that debates over money are complicated by competing notions of what it means for something to matter. In some sense the Monetarist-Keynesian debate was not over whether money mattered, but what it means for something to matter. A telling sign of this is that the charge of not taking monetary concerns seriously is leveled by both sides of the debate. In the eyes of a Monetarist/Keynesian, a Keynesian/Monetarist is an economist who hasn t taken the reality of money seriously enough. Again, while differences over theoretical and empirical approaches are not unimportant, I find they are insufficient in explaining these debates. A further example of the role the philosophy of money can play is Patinkin s treatment of the classical dichotomy. In chapter 8 of his classic Money, Interest, and Prices he produces an interesting critique of neoclassical monetary theory. It is neither a strictly external critique from an alternative framework, nor is it strictly internal. In a limited sense Patinkin s critique can be read as deconstructive. 2 What he shows is that the implicit logic underlying the classical dichotomy involves a violation of this dichotomy. In Patinkin s view, the neutrality of money results from showing that demand for goods will not change given a change in the price level. The practice of assuming individual behavior does not take the price level into account is invalid, because it assumes away precisely the mechanism through which a change in the price level could fail to influence relative prices. If we accept this evaluation, the obvious question is 2 I use deconstructive in a relatively precise sense. Deconstruction involves an unraveling of the binary oppositions found within a text. When Derrida deconstructs Rousseau s privileging of speech over writing, he does so through Rousseau s own text. Instead of offering an external criticism from an alternative framework, he shows how the textual privileging of speech undermines itself. 24

39 how and why this invalid dichotomy (Patinkin, 1956, Ch.8) persisted. Patinkin s answer is what he refers to as passwords: [I]t also shows the reassuring passwords which discouraged critical examination and thus made the dichotomy s continued acceptance possible. The password of being a friend of the quantity theory, the password of connecting value theory with relative prices and monetary theory with absolute prices. The password of demand depending only on the ratios of prices...all of these are valid passwords - within a certain context. But this very multiplicity of respectable passwords dissuaded economists from looking more closely and seeing that in every single case the context was false. That in every single case there was a seemingly slight - but actually vital - difference. (ibid., p.113) What exactly are these passwords? They are neither theoretical positions nor necessary conclusions of economic theory. Indeed, for Patinkin s they persist despite theory. Within the very domain of economics - the true context - they are invalid. But if they persist despite economics, what do they persist through? My argument is that these passwords are, at least in part, products of a social ontology. In particular a dualist ontology that understands the economy as fundamentally split between its real and less real sectors. The context in which they are valid is the set of presuppositions conditioned by this ontology. The simple quantity theory, the strict distinction between relative and nominal prices, and other passwords, make sense in the context of a dichotomous view of the economy itself. Due to the reoccurring importance of some conception of the real, I refer to this ontological tendency as the realist dualism. It is not a position on the classical dichotomy or neutrality of money, but rather the broader epistemic conditions of these problems themselves. In other words it does not operate on the level of specifying the relationship between the real and monetary (of which there are multiple approaches), 25

40 but rather in the distinguishing between a real and a monetary as ontologically distinct in the first place. First, I discuss precisely what I mean by the realist dualism, explaining its typical features and influences on economic thought. Language metaphors are a frequent means through which this dualism is thought. However, to say that money is like language is a to say very little without specifying a particular notion of language. For this reason, I outline some simple linguistic models corresponding to competing economic approaches to money and reality. I then present two examples of the realist dualism from very different times and theoretical places. First, I discuss Aristotle s positions on money and economy. Aristotle is a useful case because his economic work is relatively well-known and its philosophical character is quite explicit. Next I turn to the more modern example of the realist dualism in macroeconomics. Macroeconomic theory provides the the opportunity to show how extra-economic meaning still operates within modern economic discourse. In particular, I ll argue that the centrality of price rigidities to 20th Century macroeconomics is in part a product of the particular dualist social ontology it presupposes. 2.2 The Realist Dualism as Problematic? As stated above, what I call the realist dualism is more general than the classical dichotomy result. While the latter is a solution to the problems posed by a distinction between the real and the monetary, the former is this presupposition of the distinction itself. It is, in other words, the acceptance of a problem. For this reason, it has different manifestations corresponding to alternative solutions. At the same time, because it begins from a particular problem, the real-monetary relationship, it (1) has certain tendencies and (2) may proscribe the posing of alternative problems and 26

41 approaches. 3 As I describe it, the realist dualism appears to be an example of what Althusser called a problematic (problématique), Kuhn s notion of a paradigm (1970), or the Foucauldian episteme (1972; 1980). There is, however, an important theoretical distinction whose elucidation will serve to clarify the meaning and significance of the realist dualism. Althusser describes a problematic in his discussion of the conditions of science : This introduces us to a fact peculiar to the very existence of science: it can only pose problems on the terrain and with in the horizon of a definite theoretical structure, its problematic, which constitutes its absolute and definite condition of possibility, and hence the absolute determination of the forms of the forms in which all problems must be posed, at any given moment in the science. (1997, p.25) As a condition of possibility, a problematic is both productive and restrictive, and we err in seeing simply one or the other. In Althusser s language it makes some objects visible and others invisible. The conditions upon which we can pose one set of questions and answers are the same conditions under which alternative research directions are excluded. Modigliani s distinction between monetarists and nonmonetarists, made in his AEA presidential address, is illustrative here - Nonmonetarists accept what I regard to be the fundamental practical message of The General The- 3 Examples abound within economics. Within many paradigms, the problem of growth is posed as essential. Different theoretical and empirical approaches to this one problem exist, but each accepts the problem as such. Even attempts to produce alternative measures of economic activity accept certain aspects of this problem when they critique traditional measurement methods. Allocating resources to superior measures of growth, at once challenges the traditional method while accepting the objective of growth, and the ideal of accurate quantitative assessment. This is not necessarily a problem. What is problematic is that the particular object is reified into the natural object of economic analysis. For suggestions on improving measures of growth, by including unpaid labor for example, see Ironmonger (1996), Folbre (2001, Ch.3), and Luxton (1997). For an alternative that poses a different object of analysis and distinct methodology see of Cameron and Gibson-Graham (2003). 27

42 ory: that a private enterprise economy using an intangible money needs to stabilized, can be stabilized, and therefore should be stabilized by appropriate monetary and fiscal policies (1977, p.1). This framing of the debate is productive in the sense that it provides a framework in which to conduct research. Is the economy essentially nonmonetarist or monetarist? At the same time, this very language renders invisible and unintelligible other non-monetarists. For example, compared to Modigliani s non-monetarist, Marxian political economists typically have significantly less faith in the capacity of monetary and fiscal policy. In this framing, Marxian economists are not non-monetarists. However, if Marxism and Monetarism are to have any meaning, they can not mean the same thing. In Modigliani s distinction between monetarism and non-monetarism, a whole variety of other approaches become non-existent. What I call the realist dualism, operates in a similar fashion. It does not strictly dictate what is said, but provides the general framework in which intelligible statements can be made by posing a particular problem. This problem, the relationship between the economic real and the less real, is interesting and productive but is based upon a particular (dualist) social ontology that proscribes alternative approaches informed by, for example, non-essentialist social ontologies. In this sense the realist dualism is like Althusser s problematic, or the similar concepts of paradigm and episteme. In each case a framework conditions which statements can be made and understood. However, while the realist dualism seeks to explain a degree of continuity/regularity (a repetition of similar theoretical elements), these three notions each describe the history of thought as discontinuous, or incommensurable. 4 The incommensurability thesis states that concepts from one paradigm are qualitatively distinct from concepts from another, even if they are superficially 4 Kuhn (1970) and Feyeraband (1962) both adopt the mathematical concept of incommensurability around the same time. According to Kuhn (2000, Ch.2) each did so independently. Note that the original publication date of Kuhn s Structure was

43 similar. For Kuhn, incommensurability follows from a holist understanding of theory. If each individual concept is constituted by its relationships within the totality of the paradigm, differences at the level of paradigm imply fundamental differences at the level of concepts. Because concepts are constituted in this structural manner, they can not be reconstituted through the language (terms, logic, methods) of an alternative theoretical structure. 5 Althusser s problematic and Foucault s episteme also share a generally holistic approach to knowledge production, and hold principles analogous to incommensurability. 6 From the perspective of a problematic/paradigm/episteme, the history of theorizing money through its opposition to something more real, is not a continuation of thinking the same thing, but rather a series of differences under the guise of nominal similarity. The notion of the real (economy), and how money is understood as its other, is heterogeneous across paradigms. So, for example, there is a radical difference in the term real as it is invoked in Davidson s classic Money and the Real World (1972) and Long and Plosser s Real Business Cycles (1983). How then do I square my interest in the continuity of the realist dualism with this principle of discontinuity? My argument is that with respect to monetary thought, the realist dualism and the concept of problematic, operate at different levels. If there is indeed repetition in the appeal to the real and less real, this regularity is always mediated by problematics (paradigms or epistemes) that vary. In fact, it is precisely this diversity that makes the 5 Incommensurability could be stated as the impossibility of defining the terms of one theory on the basis of the terms of the other (Kuhn, 2000, p.34, n.2). This impossibility may have epistemologically radical interpretations, but need not be taken as such. Kuhn suggests a modest version in which the incommensurability of two theories implies the lack of a lanugage, neutral or otherwise, into which both theories, conceived as sets of sentences, can be translated without residue or loss (ibid., p.36). 6 If you are reading closely, yes, the concepts associated with Kuhn s paradigm, Althusser s problematic, and Foucault s episteme are ultimately incommensurable with each other. The differences, however important, are not of concern to us here. 29

44 persistence of the realist dualism interesting. If monetary thought reproduces statements in which money is understood in opposition to reality, diverse frameworks with diverse understandings of reality will produce different monetary theories. If reality were matter-of-fact, and universally agreed upon, it would be much less noteworthy that money has been theorized through reference to it. This diversity of realities is not in any way dependent on epistemological relativism. Whether an objective extra-discursive reality exists (and if so, its characteristics and our capacity to know it) is an important question. However, our answer to this question, whatever it is, does not undermine the existence of multiple notions of reality. In other words, even if there were an objectively true notion of reality, there would still be a set of false positions whose falsity does not impede them from conditioning the economic theories in which they are invoked. Second, we can not say that something is real or less real without, explicitly or implicitly, including a what (Austin, 1962). A note from the game Monopoly is not a real federal reserve, while it is certainly real game money. A note from a game I imagined in my mind but will never produce is neither a real federal reserve note nor real game money. If money, or the monetary sector, is not real, what type of thing is it not really. The point here is not that we are unable to articulate the what, but that this what can be diverse with diverse discursive effects. Consider the following stylized account of the real economy since mercantilism. According to the standard narrative, modern political economy recognizes the existence of a sort of monetary illusion in the mercantilist system in that it takes money itself as real wealth. Political economic thought can then be seen as proposing a series of real economies that provide a more appropriate theoretical object. To theorize money as not real, some thing that is real must be presented. The Physiocratic system famously grounds economics in the reality of land. Classical political economy characterizes the real economy as the sphere of production/labor. Finally, 30

45 neoclassical economics opposes the objective reality of the classics with the subjective reality of utility. In each case, the illusory linkage between money and real wealth is replaced by a particular distinction between real wealth/economy and money. 7 While the notion of the real is radically diverse across time and paradigm, a regularity exists in which these notions overdetermine monetary thought. This regularity, the realist dualism, has the following basic characteristics. Conceptual Dichotomy. This is the social ontology itself. The economy has a real and a less real sector/moment. The defining character of the former and latter, are again heterogenous. This distinction, with the privileging of the real, allows the relationship between the two spheres to function as an intelligible object of economics. 8 Real Money. Money, which is deemed less real, is itself seen as having real and less real forms and associated functions. Which form/function is primary differs, alongside different concepts of the real economy. The ontology of real and less real on the level of money is related to the broader dualist social ontology, but this relationship is not without contradictions. For example, the persistence of commodity money, as the real monetary form, in Marxian theory is in part attributable to the productivist social ontological found in the tradition. 9 7 This illusory linkage between money and real wealth may be understood as simple equivalence - money is wealth - but also in the form of a strong causal link from the former to the latter. 8 While this dualism is conceptual it is often taken as a matter of fact. In other words, this conceptual distinction is understood as something that empirically-ontologically exists outside of theory. Patinkin, who may not be entirely innocent in regard to the realist dualism, warned about this conflation: It should also be clear that the foregoing dichotomy is purely a conceptual one. The real and monetary frameworks of the actual market place are obviously specified simultaneously. Similarly, there are only money prices in this market, and these are simultaneously determined. In brief, our dichotomy has no operational significance other than that of the basic quantity-theory proposition from which it is derived. (1956, p.108) My argument is that this conflation is probable because the divide is not just a simple modeling tool, but rather the product of deeply-embedded ontological presuppositions. 9 This example is dealt with in more detail in Chapters 4 and 5. 31

46 Harmony/Dissonance and Fidelity to the Real. The articulation of the real and the monetary, and the role of money s own distinct forms, can operate in a harmonious or dissonant fashion. The harmonious, and socially optimal, outcome is understood as being true to the real economy. In other words, a harmonious outcome coincides with one in which the real, as the essence of the economy, is justly given priority. Dissonance occurs when the monetary somehow impedes on the rightful place of the real. 10 Policy/Politics. Given the existence of harmonious and dissonant real-monetary outcomes, some form of monetary policy (broadly understood) exists that achieves the former and avoids the latter. In each case, the particular type of policy (discretionary, rule-based, etc.) recommended as optimal within a theoretical tradition is overdetermined by the notion of reality they invoke. 2.3 The Language Metaphor: Competing Models of Money and Reality A pound sterling is not a thing at all. It is a name handed down in history. - Pigou (1949, p.3) Although my interest in the realist dualism is in the first instance motivated by its ubiquity, it is the diversity of its possible manifestations and effects that necessitates a careful analysis of its features. This section presents a series of linguistic-semiotic 10 Consider Keynesian and what we could call Neoliberal opinions on the merits of financial regulation. While each group would differ greatly over whether the pre-1970 or post-1970 institutionalregulatory environment is preferable, the contours of their arguments are similar. In each case, the good monetary-financial system is one that serves the real economy. For many Keynesians the post- WWII system of regulations provided constraints on the financial sector that forced it to serve the real sector. Deregulation allowed finance to serve itself, at the cost of the real economy. For Neoliberals, it is the inflexibility of regulation that prevents the financial sector from efficiently providing services (risk-sharing, information, capital allocation, etc.) to the real/general economy. It is not that there is no important difference between the two positions, but the significance of what they do share - the privileging of an idealized real economy that can/should be served by a financial sector as a goal of economic theory/policy - is overshadowed by the more obvious matters of contention. 32

47 models exemplifying this diversity. The history of monetary thought is littered with linguistic-semiotic metaphors in which the relationship between real economy and its monetary other is viewed as analogous to the relationship between an objective reality and the reference to this reality through words and signs. 11 Linguistic-semiotic metaphors are not in themselves a problem. Because I accept metaphor as asymptotically unavoidable, I am not a critic of this practice itself. At the same time, accepting these models uncritically is problematic because it assumes a singular and universally understood conception of the word or sign. Dyer (1986) and Wennerlind (2001) both discuss linguistic-semiotic models and metaphors within monetary thought but fail to identify the radically different forms this may take. There is no semiotic model in general. Consider Pigou s comment apropos of the pound. The statement that the pound is a name is ambiguous because there are multiple theories of the names. 12 Pigou implicitly acknowledges this by also stating that the pound is not a thing, invoking a dualism of things and names that marginally clarifies his argument. Since the recourse to the word/sign is historically ubiquitous, different linguisticsemiotic approaches can be used to represent different interpretations of the relationship between the real and the monetary. 13 Because this dualism between economy- 11 It is important to note that this relationship operates in both directions. If money is thought through language and reality, language and reality are themselves thought through monetary metaphors. As Maurer notes, The difficulty in...the anthropology of money is compounded by the reliance of much anthropological research on theories of meaning and symbols that derived analytical precision through monetary metaphors (2006, p.16). 12 See Soames (2005) for one example. 13 The interplay between the philosophical-linguistic - broadly understood - and the monetary is the object of a sizable literature. Certainly, no text on money hoping to reach a broad audience of the educated and curious is produced without some appeal to the philosophical. Among work that can be characterized as having a serious commitment to the problem Shell (1982) stands out. See also Shell (1995; 1978). Goux is noteworthy for work focusing on the shift in literary models corresponding to shifts in monetary regimes (1984; 1988), and attempts to incorporate these insights into a political economy type framework (1990). Karatani perhaps goes furthest in explicitly bringing the philosophy of money to political economy, introducing what may be called a linguistic interpretation of Marx s writing on money (or monetary exchange) (1995), that is further developed in relation to Kantian 33

48 money is repeated in the concept of money itself (real money - symbolic/imaginary money), I take two passes, using simple linguistics for the former and semiotics for the latter. First I use a stylized account of the divide between semantic and pragmatic approaches to language to characterize different theories of the relationship between the real economy and less real money. Second, I use the famous semiotic triad to discuss alternative notions of real money Semantics and Pragmatics Semantics, in its simple traditional sense, is the field of linguistics that studies a word s literal meaning. From a semantic perspective, the significance of a word is what it signifies or refers to. Despite the negative connotations tied to the notion of playing semantics the semantic view on language is roughly similar to common sense ideas of speech. In the semantic model of the realist dualism emphasis is placed on money s capacity (or incapacity) to accurately reflect/represent the real economy. A money-price is to a commodity as a word is to its referent. As good speech, semantically speaking, is speech that accurately represents the ideas meant to be communicated, a good monetary regime is one in which money accurately reflects some fundamental aspect of the real economy. Pragmatics, in the sense I am using here, focuses on how context dependent speech acts arrive, or fail to arrive, at goals. Pragmatics seeks to explain how speech acts with ambiguous or exceptionally little literal significance can work in achieving an outcome. This approach is at odds with the common sense notion of language as strictly literal and referential but it is also a typical part of our social lives. For example, most of us use utterances with very ambiguous literal value that none the less succeed. At a dinner table with close friends someone can bark salt if they philosophy (2003). For a critique of Goux and Karatani s developments of a Marxian approach to money see Chapter 3. 34

49 want to have the salt passed to them. This will often work - someone will pass the salt - even though on literal grounds alone it could have meant infinitely many things involving salt. Pass the salt. Don t pass the salt. Throw the salt out of the window. My uncle loves salt. Some of these are ridiculous and absurd interpretations of what a friend could possibly have intended. This is precisely the point. The literal meaning of the utterance alone can not account for the speaker s (lack of) success. The success/failure of an utterance is context dependent, and is not strictly about literal accuracy. In the pragmatic model of the realist dualism, the principle feature of money is its capacity to achieve desired objectives. In particular, a good monetary system is one that assists the economy in realizing the goals of the real economy. A similar, but not identical, way to think about this distinction is through the difference between constative and performative speech (1975). The principle way to distinguish between the two is how statements can be judged. Any statement that can either be true or false falls into the category of the former. These are claims that attempt to mirror/reflect/represent a preexisting state and can therefore do so accurately or inaccurately. Performative statements can not be judged as simply true or false. In the typical example of the pronouncement of marriage, the utterance that a couple is husband and wife is without a preexisting state it can accurately reflect. It produces the outcome it describes. 14 The distinction constantive/performative 14 Despite certain interpretations, the notion of performativity is not a suggestion that merely stating something will bring it into existence. This has very little to do with performativity. The 35

50 roughly maps onto the semantic/pragmatic binary, with the qualification that performativity entails a relatively strong pragmatic position. Aristotle s work is an example of the pragmatic model. It is not that there is no concern with the representational or referential role of money but that the central problem is whether money helps us achieve our desired real economy ends. The difference between C-M-C and M-C-M does concern not the accuracy with which monetary prices reflect some essence of commodities. The significance of this subtle movement is that money changes its role due to a contextual shift in which the same elements end up doing different things. We will return to Aristotle in more detail in section IV. In the history of social thought the clearest member of the semantic tradition might be Rousseau. As Marc Shell (1978) documents, Rousseau s views on money are directly informed by his theory of representation. This theory leads Rousseau to analogous critiques of representation in pedagogy, politics and economy. The similarities between these critiques stem from an underlying distrust in representation: In general, never substitute the sign for the thing except when it is impossible for you to show the latter, for the sign absorbs the child s attention and makes him forget the thing represented. (Rousseau, 1979, p.170) This same dualism between the privileged thing and the threat of the mere sign/representative is at work in again in the famous attack on the English in Chapter XV of On The Social Contract: Sovereignty cannot be represented for the same reason that it cannot be alienated. It consists essentially in the general will, and the will does not point is not that such statements are always successful in producing effects. Not everyone can utter - let there be light, and produce light (Butler, 1993, Preface), but the key difference between the God of Genesis and the average person attempting such a feat is not on the level truth/falsehood but rather effects. 36

51 allow of being represented. It is either itself or something else; there is nothing in between...the English people believes itself to be free. It is greatly mistaken; it is free only during the election of the members of Parliament. Once they are elected, the populace is enslaved; it is nothing. (Rousseau, 1987, 198) Rousseau was apparently well aware of the relationships between his understanding of social ontology, representation and the issues of pedagody, linguistics, politics and economy. He explicitly uses the artificial character of representation in one field to attack the integrity of representation in another. Writing on Poland, he critiques the fixation of money by comparing it to a sign, where a sign is assumed to be less than real/riches - L argent n est pas la richesse, il n en est que le signe (quoted in Shell 1978, p.121). Here he uses the artificial character of the sign, to argue money is also not real (wealth).chapter XV of On The Social Contract begins with the topic of money through a reference to the danger of citizens who prefer to serve with their wallet rather than their person (p.197) and Rousseau quickly associates money with slavery - Give money and soon you will be in chains. The word finance is a slave s word (pp ). In these cases, the implicit artificiality of money is deployed to oppose fictitious forms of citizenship. Both of our examples here are skeptics in the sense that they distrust money, worrying about its influence of economy and society. For Aristotle, the elevation of money to an end itself produces negative consequences. With Rousseau, money s representative character is dangerous because representation itself is taken to be suspect. Given the history of anxiety over the threat of money, this is not surprising. However, this anxiety over dissonance between the real and money, is coexstensive with an implied image of a harmonious relation. And while, they differ in specifics, both Aristotle and Rousseau find harmony when money stays in its place, as determined by the real economy. 37

52 It is also not surprising that in the modern era we can find approaches to economymoney that place more trust in monetary exchange. Classical dichotomy type models are a more modern version of a semantic, and in this case skeptism-free approach. It is semantic in the sense that money prices are merely descriptive of goods and services whose existence, production, or distribution is presupposed. Money-prices do not have effects, they do not call behaviors into action. Money-prices are strictly constative. In this sense they can be true or false - in terms of representing fundamentals - and are typically the former. Because real relative-prices are both optimal and logically prior to the determination of the money price level there is no Rousseauian danger that using representative names (nominal prices) will subvert the real world of commodities. The theory of monetary circuit (see Graziani (2003)) is a useful modern example of a more pragmatist approach to money and economy. In a circuitist framework the role of money is related to its effects. The accuracy in which money allows prices to reflect a fundamental is of little theoretical concern. Money is theorized through conditions of capitalist reproduction. The monetary economy doesn t so much reflect/represent, as allow certain activities to occur. 15 As a final note on pragmatics-semantics, we should take these models as ideal types. While the differences between them are heuristically useful, they are not necessarily mutually exclusive in all cases. The importance of the semantic fidelity of money/finance/prices to the real economy is often driven by the effects it has on behavior. In other words, the descriptive capacity of a set of prices is socially efficient because it helps produce/guide socially efficient behavior. For example, the efficient market hypothesis has a semantic dimension. For each asset price exists a real fundamental. Market efficiency is understood as a (best possible given available 15 It is not a coincidence that this pragmatic, and potentially even performative, notion of money exists in a theory based on the concept of reproduction, as opposed to equilibrium. 38

53 information) correspondence between prices and fundamentals. However, the social desirability of efficient financial markets is motivated by the economic activities it allows. The primary role of the capital market is allocation of ownership of the economy s capital stock. In general terms, the ideal is a market in which prices provide accurate signals for resource allocation: that is, a market in which firms can make production-investment decision, and investors can choose among the securities that represent ownership of firms activities under the assumption that security prices at any time fully reflect all available information. A market in which prices always fully reflect available information is called efficient. (Fama, 1970, p.383) The efficient market hypothesis is therefore not a purely semantic view of moneyeconomy, despite the strong semantic features. However, even when the effects of prices/finance on behaviors are considered, it is nonetheless the descriptive optimality of prices that is essential. It is in the last instance a strictly constative (as opposed to truly performative) view of financial markets Semiotics of the Coin If a simple dualism between the represented and representation characterizes the logic of the difference between real economy and money, the difference between real and less real forms of money itself has often been thought of in threes. In particular, money has been considered to exist in real, symbolic, and imaginary forms. While this is a triad, it does fit within the scheme of the realist dualism. First, although money comes in threes, each of the three are typically distributed into the category of real or less real. Second, one of three may play the role of intermediary between real and less real money. Finally, there is mutual conditioning between the dualism ontology of general economy and this ontology of money itself. 39

54 The monetary triad bears a strong resemblance to the standard semiotic triad. One of the most well-known statements of the sign is offered by Pierce (1932) who distinguishes between three elements - representamen, interpretant, and object. The representamen is that which represents or stands for something else. The interpretant is the mental-imaginary representation produced by the representamen. Finally, the object is the thing the referred to. While the representamen is what we most commonly understand as the sign itself, Pierce sees the sign as a unity of the three. Signification always involves each element. A similar logic is applied to money. As we discussed in the previous section, money has been thought of as a language with a commodity as its object. The distinction between the real and a symbol, does not stop there, but is also applied to money. Money itself has real, symbolic, and imaginary manifestations and forms. The common trope in beginning a text on money invokes a history of dematerialization in which hegemonic forms of money evolve from their most real, material forms to merely imaginary and symbolic forms. 16 Despite the diversity of possible monetary forms, economic thought often takes one of these dimensions as the real essence of money. The essence may be what we have called the real commodity form, but it need not be. Multiple essentialisms, which take either the physical, imaginary, or symbolic aspect (and its respective form/function), as the singular essence of money are possible. For example, Simmel (1991, pp ) takes what others see as the dematerialization of money (he calls it a spiritualization ) as a movement towards 16 The introduction to Marc Shell s Money, Language, and Thought (1982) is entitled From Electrum to Electricity, referring to the material content of original coins and the current medium of our supposedly dematerialized electronic money. Ferguson begins his recent contribution to popular histories of money, by opposing the brute presence of physical silver money with the meekness of paper-representative money and the absence that marks imaginary digital money: But what exactly is money? Is it a mountain of silver, as the Spanish conquistadors thought? Or will mere clay tablets and printed paper suffice? How did we come to live in a world where most money is invisible, little more than numbers on a computer screen? Where did money come from? And where did it all go? (2008, p.1) 40

55 the true essence of money. The real form of is thus money as pure function liberated from the real (qua physical-material) form. Marx s discussion of money in Part 1 of Capital is an interesting counter to Simmel because it can be characterized by both an emphasis on different imaginary and symbolic types of money (corresponding to different functions) and an insistence on the ultimate priority of the real commodity form. 17 In this we get a sense of both the three registers of monetary ontology, and how they fit within the realist dualism as it exists in the Marxian tradition. In its function as measure of value, money therefore serves only in an imaginary or ideal capacity. This circumstance has given rise to the wildest theories. But, although the money that performs the functions of a measure of value is only imaginary, the price depends entirely on the actual substance that is money. (Marx, 1976, p.189) In the same chapter we see how real commodity money provides the ground upon which valueless (and less real) symbolic money can function as money. Note that paper money is not really money, but a symbol of money. Furthermore, the third term, the imaginary, plays the role of intermediary between symbol and symbolized. Paper money is a symbol of gold, a symbol of money. Its relation to the values of commodities consists only in this: they find imaginary expression in certain quantities of gold, and the same quantities are symbolically and physically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value. (ibid., p.225) 17 Emphasis is placed on the can be characterized because other readings will be produced in this dissertation. 41

56 The condition of existence of paper money, in Marx s analysis, involves all three monetary forms (symbolic, imaginary, and real) and multiple functions. Paper money can act means of exchange because (1) it represents real gold and (2) commodity values are expressed according to a standard of price stated in imaginary units of gold. Nonetheless, at least in the orthodox interpretation, we should not mistake the imaginary or symbolic as being on the same level of determination as real commodity money. In the last instance, the imaginary and the symbolic are determined by the real. Deviation from this logic has been viewed with great suspicion, in part due to the realist dualism in orthodox Marxism. While Marxists have increasingly sought to theorize non-commodity forms of money, the abandonment of commodity money is experienced as a threat to the link between the real economy, characterized by forces and relations of production, and the less real sphere of distribution and exchange. The idea that the movement away from commodity money to fiat or credit regimes may undermine the labor theory of value is illustrative of this link between the ontology of the real economy, and the ontology of real money. It would follow that alternative traditions, with their own notions of the real economy, would have different ontological concerns over money. Pigou nicely expresses the particular reality of the neoclassical economy- In the deepest sense economic reality comprises states of mind - the satisfactions and dissatisfactions of human beings - and nothing else (1949, p.19). A contributor to the founding of neoclassical economics and a commentator on monetary theory Jevons, exemplifies how this distinct ontological contributes to distinct monetary problems. Like Marx, Jevons distinguishes between money that is truly money, and money that stands in for, or represents, true money: We may pass, in fact, by gradual steps from the perfect standard coins, whose nominal value is coincident with their metallic value, to worth- 42

57 less bits of paper, which are yet allowed to stand for thousands, or even millions of pounds sterling. (1896, p.194) Jevons also deploys semiotic language in making sense of money. Although he follows the tradition of defining a coin itself as a unity of the real/ignot and symbolic/stamp (1896, p.57) - he also makes distinctions between three types of coins, according to the determination of their value: We must further distinguish coins according as their values depend upon the metal they contain, the metal for which they can be exchanged, or the other coins for which they are the legal equivalent. (ibid., p.67) Again, despite the triad, these types of coin are theorized through a dualism. Jevons refers to the first form as standard and the latter two as token (ibid., 74). These three bear some resemblance to Marx s monetary forms. However, despite characterizing token types of money as less real, they do not pose the pose the problems for neoclassical economics that they do for Marxian. Neoclassical discussions of token money are not full of reminders that ultimately it is real commodity money that determines its value. This is not to say that less real forms of money do not pose different problems for neoclassical economics. Jevons concludes his discourse on money with a policy position that exhibits one of these problems - one that has persisted to this day despite his hope for the progress of economic science: In my opinion, it is the issue of paper representative notes, accepted in place of coin, which constitutes an arbitrary interference with the natural laws governing the variations of a purely metallic currency, so that strict legislative control in one way leads to more real freedom in another. I am quite willing to allow, however, that questions of great nicety and subtlety arise in this subject, and that only in the gradual progress of economic science can they be finally set at rest (ibid., 342). 43

58 The language here is quite rich. Paper money is representative, in place of (not a presence but a marker of an absence), arbitrary, and issued as an interference. This spectral ontology is opposed to both a real money that is present (not representative), metallic, and in line with natural law, and the real economy that is the source of these laws. However, despite the rhetorical and logical privilege afforded to this physical commodity type of money, Jevons is not a metallist. Token money can relate harmoniously with the real economy, but requires a policy reversal with respect to standard money. Absent the natural laws that would operate in a regime of real money, artificial laws are needed to govern artificial money. 2.4 Aristotle on Money Many discussions of Aristotle s economic thought begin with the question of his analytical content. Does Aristotle engage in real analytical economics or are his writings mere philosophy/ethics? Are his categories economic or metaphysical? My understanding of the philosophy of monetary economics makes it impossible to answer these questions. Certainly, I am personally interested in the way in which his analysis is conditioned by a series of mutually supporting/dependent economic, ontological and ethical dualisms. However, in my reading of the history of monetary economics, the overdetermination of his monetary analysis by normative and philosophical concerns is just one example of the way supposedly innocent categorical distinctions between real and monetary processes are always connotatively and denotatively overdetermined by extra-economic conceptions of reality. Aristotle is an appealing example of the realist dualism in monetary thought for a few reasons. First, the philosophy is explicit in his work. The extra-economic dimensions I argue are ubiquitous over time in often implicit forms, are explicit here. Second, Aristotle s monetary thought is relatively well-known. Finally, despite the relative familiarity of Aristotle, our understanding 44

59 of his specific monetary positions contains some ambiguities and tensions that are illustrative of the realist dualism. For many economists, the most significant appraisal and representation of Aristotle likely comes from Schumpeter who credited him with great historical influence. According to Schumpeter, Aristotle is responsible for the metallism that prevailed substantially to the end of the nineteenth century (1954, p.63). Because metallism is not held in high regard, and is seen by some as an oversimplification of Aristotle s thought, this popular interpretation has been challenged. Gordon (1961, p.609) charged Schumpeter, as well as Monroe (1923), with deriving Aristotle s monetary thought primarily from a single passage, neglecting other moments that represent money as a creature of the law (ibid., p.611). Alter attempts to evaluate the strength of Gordon s argument and arrives at the anti-climatic conclusion that given the textual evidence we can side with neither Monroe and Schumpeter, nor Gordon, but that it is perhaps a safer bet to read Aristotle as a metallist than non-metallist (1982, p.563). More recently, Wood (2002) identifies two streams of thought in Medieval monetary thought premised on the theory of money as an intrinsically valuable commodity and a mere conventional sign. 18 In her reading, this tension is never resolved. There is no collapse into strict metallism. Monetary thought of the period operates with a mean between the two, and seems to subscribe to both (2002, p.73). This challenges both Schumpeter s claim concerning the relative dominance of metallism, and the 18 Wood (2002, p.70) describes the two tendencies in language in line with the realist dualism: For the scholastics, money had two distinct roles. It was, firstly, an artificial measure of value, authorized by the State, against which all things could be gauged, but which had no other use. Secondly, since it was given physical reality by coinage made of precious metal, it came to be seen as a commodity with a value that could rise and fall, like that of any other commodity. These two ideas were given practical expression in the two types of money prevalent in the Middle ages, actual money in circulation, and ghost money, or money of account. 45

60 nature of Aristotle s influence. For Wood, this tension existed because, not despite, Aristotle s own ambiguities and influence. From the perspective of the realist dualism, this ambiguity is not surprising. As we mean manifold things when we speak of the real economy, money - as in real money or as in opposition to the real economy - takes on different forms. The presumption that the presupposition of the economic real is innocent and uncontroversial prevents understanding of these complexities. In this case Aristotle s monetary thought is confusing because he (1) refers to money as a metal thing and (2) thinks of money as less real, or even as a nothing. This is only contradictory with respect to a particular notion of real economy. To better make sense of Aristotle, a discussion of the specific manifestation of the realist dualism in his thought is useful. The importance of dualism(s) in Aristotle s economics is hard to ignore. And while economic orthodoxy presumes to have transcended these normative or metaphysical problems, others have pointed out their continued relevance. Meikle goes so far as to claim that Aristotle s difficulty about the nature of money is not an elementary one which can be resolved easily with the resources of modern economic thought, because the same duality is present there too (Meikle, 2000, pp ). However, for Meikle this continued dualism is not social-ontological but a political-normative contention between the friends or foes of market economy (168). Kozel (2006) makes a similar point concerning the continued relevance of Aristotle s economics. For Kozel however, Aristotle is relevant not so much for being either friend or foe, but for illustrating a more subtle and less reductionist approach to markets and exchange. It is here that money enters our discussion. Aristotle s analysis of exchange centers on the telos of a set of exchanges and the subsequent role of money in the process. Money may exist as either a means or an end. In the process of C-M-C money (M) is a mere means used to gain a necessary/desired commodity (C). In the process of M-C-M money becomes an end in of itself. While Aristotle finds the first natural 46

61 and likely beneficial to society, he finds the second unnatural and potentially harmful. What I want to stress here is that while this position involves a political claim about markets (friend and/or foe), the structural role of money goes beyond being a simple metonymy for exchange. The question of whether we should be friends or foes of the market that Meikle recognizes is overdetermined by various other dualisms in Aristotle s work, including an ontologically dualist understanding of economy and money. 19 But again at other times money seems to be a nonsense and altogether a thing of law and by nature nothing, because of its users change the currency, the original one is not worth anything nor useful at all with a view to necessities, and someone who is rich in money will often be lacking in necessary food. Yet it is a strange thing for that to be wealth which one can abound in and still starve to death, like that fellow Midas in the fable when, because of the insatiability of his prayer, everything placed beside him changed to gold. (Politics I: 1257b5) This passage illustrates a rather dense network of mutually supporting dualisms that overdetermine Aristotle s economics. The first sentence alone references distinctions between sense and nonsense, law and nature, something and nothing, necessity and (an implicit) contingency, riches and biological needs, insatiability and sufficiency. These dualisms constitute the difference between the natural science of household management (or oikonomikê where money is a means) and the unnatural world of business (or chrêmatistikê with money as an end). These distinctions constitute the realist dualism in Aristotle s economy and can be used to help us make sense of Aristotle and the characteristics of the realist dualism 19 This is the limitation of work like Frankel s Two Philosophies of Money (1977) that reduce the multiple dualisms and conflicts constituting monetary thought to a debate between proponents and opponents of the free market. 47

62 Table 2.1. Aristotle s Dual Economies Oikonomikê nature commodities money as means necessity sufficient quality use-value real Chrêmatistikê convention money money as end contingency unlimited quantity exchange-value less real in general. While I m responsible for the specific language of real and less real, I do not think it is a drastic move to read an ontological dualism privileging the realness of commodities (real wealth) over money. Money is a merely a thing of law and from the point of view of nature nothing. Aristotle s use of the story of Midas suggests that in the extreme money becomes even less real - further removed from the world of biological needs and actual wealth and nourishment - the more one has of it. This means that the gap between money and actual goods and services is not quantitative. More money (Midas) does not bridge but rather accentuates the gap. 20 Furthermore, it should be quite clear that the lack of reality that marks money is completely independent of its physical materiality. The difference between gold currency (a nothing) and food, for example, is not that the latter is any more solid. Rather, they fall into the different categories of quality and quantity (Meikle, 2000, p.171). 20 This point is crudely expressed by the classic Mtv cartoon Beavis and Butthead. In the Green Thumbs episode they attempt to bribe a cashier into accepting poorly counterfeited cash with additional obviously-photocopied dollar bills and coins. This is also an example of the way the real/less-real distinction is inscribed in money itself in the forms of ingot/stamp, backed/unbacked and real/counterfeit. 48

63 Aside from this very particular notion of the real/natural economy, ambiguity over Aristotle s true money is also conditioned by the absence of any serious discussion of different monetary forms. This is not to say he does not imply true and untrue money. It is more that the question of real money (the second characteristic of the realist dualism) is directly collapsed into the problem of harmony/disharmony. Money, in whatever form, has an important, natural and beneficial role but it also always threatens the oikonomikê it was meant to serve. When it operates in the latter mode, money had the potential to be especially unnatural - it is not only a convention meant to serve a natural process, but dares going against its own nature (the nature of a convention) by becoming an end itself. Aristotle is likely not a metallist in any strict sense, but at the same time he is only a non-metallist to the extent that his notion of real money focuses primarily on its role with respect to the real economy, and not on the particular form money can/must take. Aristotle s model, simply expressed in Table 2.1, poses both a harmonious world where convention/money is subservient to the natural/real economy, and the threat to this world. It is also a model in which claims about what should be and what is are intimately entangled, making the abstraction of one from the other suspect. Aristotle s positive understanding of money as primarily a medium of exchange is informed by his ethical understanding of a good economy as one in which money serves exchange. But this ethical position itself is conditioned by his ontological assumptions about what is. To be clear, this positive what is is not a pre-theoretical objective reality, but philosophical-methodological concept produced by privileging one aspect or dimension of economic life as fundamental and natural. 49

64 2.5 Dualism and Macroeconomics, or, The Rigidity of Rigidity It should be quite clear that dichotomous macroeconomic models are consistent with the tendencies of the realist dualism. They posit a logically prior, mathematically predetermined, real sector opposed to a neutral monetary side of the economy. While this is straightforward, less obvious is the ways in which variants of Keynesian economics, often introduced in direct opposition to the so-called classical model, are conditioned by a similar dualist vision. For this reason I ll discuss the existence of ontological dualisms at work within variants of Keynesian influenced macroeconomics. The principle features of Keynesian thought are subject to profound disagreement. 21 For example, the oft-cited Keynesian reliance on price rigidity is in direct opposition to the Post-Keynesian view in which price flexibility would make the economy less, not more, stable. Why has rigidity been considered so important for Keynesian economics, despite - according to the protests of Post-Keynesians (see Davidson (1974; 1998)) - Keynes himself? Ball and Romer s 1990 paper begins with a very unexceptional statement, that nonetheless suggests a link between the dualist ontologies behind modern macroeconomics, and the persistence of rigidity - According to Keynesian economics, nominal wages and prices are rigid, and so nominal disturbances have real effects (p.183). The whole project is motivated by the search for the real effects of nominal disturbances. This is familiar economic knowledge, but it has the familiarity that Hegel warns might impede understanding. Lest we simply take this project for granted, there are two points of interest here. 21 Not surprisingly, the existence of this heterogeneity is well-known only among those belonging to the heterodoxy so that while Post-Keynesians critique New Keynesian interpretations, the latter largely operates as if the former did not exist. 50

65 First, note that the nominal is characterized as a disturbance. The denotative and connotative content of this term is apparent. Disturbances are not only bad, but they are secondary. However annoying they may be, they are both temporary and external to the thing being disturbed. The unexceptional character of such claims is evidence of the ubiquitous condensation of normative, methodological, and rhetorical dimensions of the realist dualism. Second, the problem concerns what we could call the performativity of the monetary sector. While orthodox economics, Keynesian or non-keynesian, can account for the representational or constative dimension of money, it stumbles in theorizing the performative. This difficutly operates on two levels. First, there must be an explanation of how prices can do something other than reflect fundamentals. Surrounding this problem is the literature on the microfoundations of nominal rigidities. However, in the language we used earlier in characterizing linguistic models of economy, the existence of nominal rigidity remains on the level of the semantic/constative. Despite the fact that prices are in some sense wrong, they are nonetheless judged from the perspective of correspondence with a preexisting real economy (defined according to tastes, endowments, and technology). The second step is moving from the constative, but wrong, to the truly performative, where money has real effects. Orthodox macroeconomics exhibits uneven development on these theoretical fronts. Modeling constative success is trivial, constative failure not terribly difficult. Performativity becomes the stumbling block. The problem is that modern macroeconomics, at least in most of its mainstream variations, is premised on a realist dualism I have described as semantic. As such, any project to theorize the performativity of the monetary-financial is frustrated by its philosophical-methodological conditions of existence. 51

66 2.5.1 Modigliani s Classical Models Textbook presentations of Keynesian macroeconomics almost never begin with Keynes himself. 22 By and large Keynes is introduced in opposition to the classicals. Given this entry point, the way classical economics is understood and the character of Keynes opposition is quite critical in the evolution and understanding of Keynesian thought. Despite the ambiguity over who these classical economists were, where this classical model came from, and the multiple ways in which this monolithic model might be opposed, the truth of Keynes is formulated as a system of equations that differs from the system of equations economists believed in before him. As Darrity and Young (1995) exhaustively document, in the aftermath of of Keynes General Theory there was no consensus on either the economics of the classicals or Keynes himself. 23 A variety of different mathematical presentations of the character of the two models circulated before one variation found its way into textbooks. However, once IS-LM became a pedagogical fixture, the history of its production, including both the specificity of the interpretation of Keynes and the retroactive formulation of the classical mode, was effaced. 24 An illustration of this effacement is the complete absence of references to the any supposed classicals in these presentations. Chapter 1 of Sargent s macroeconomic theory textbook (1987) focuses solely on the classical model. Outside of a text on differential equations from the 1940s, the earliest reference in the entire chapter is Cagan s 1956 paper. 25 Morgan (1978, Ch.2) 22 To the extent that they do it is simply through reference to his famous quotable moments. 23 See also Young (1987). 24 Protests that Hicks bastardized Keynes, are also guilty of this effacement. While recognizing the existence of an other Keynes outside of the textbooks, such claims accept the singularity of Hicks mathematization and the monolythic status of the classical model. For a useful history of macroeconomic heterogeneity during the inter-war years see Laidler (1999). 25 On the whole, this chapter on the classical model has 18 references, with an average publication date of

67 excludes any references in his presentation, and is not exceptional in doing so. Neither of these texts are an attempt at the history of economic thought, and their respective approaches are likely legitimate given the (pedagogical) goals of each. Nonetheless, in service of these goals a certain understanding of the classics, Keynes, and the macroeconomy itself is reproduced. While Hicks (1937) is often given credit for the IS-LM framework, De Vreoy (2000) reminds us that the IS-LM interpretation (and the nature of the Keynes-classics distinction) the discipline is most familiar with owes much more to Modigliani (1944). While the existence of rigidities are important for both, the shift from Hicks to Modigliani significantly transforms the understanding of the classical model. For Hicks, the key difference between the classical and the Keynesian model is the effectiveness of monetary policy (Vroey, 2000, p.304). The former allows an expansion of the money supply to lower unemployment, while such policy is ineffective in the latter. While the limitations of monetary policy, especially in the case of the liquidity trap, should not strike the reader as foreign to Keynesianism, Hicks characterization of the classical model is without doubt at odds with the contemporary received view. 26 Modigliani s models are much more familiar. Whereas unemployment existed in both of Hicks models, Modigliani presents a dichotomous classical model with a full employment equilibrium and monetary neutrality, and a non-dichotomous Keynesian model in which equilibrium may not coincide with full employment. In the latter 26 Hicks is in fact quite lucid when making this point. Here he is discussing the classical model: An increase in the supply of money will necessarily raise total income, for people will increase their spending and lending until incomes have risen sufficiently to restore k to its former level. The rise in income will tend to increase employment, both in making consumption goods and in making investment goods. The total effect on employment depends upon the ratio between the expansions of these industries. (ibid., pp ) The distance between Hicks classicals and ours is hardly due to any ambiguity in his exposition. Nor was this understanding unique to this 1937 paper. Two decades later in his review (1957, p.283) of Patinkin he makes the same essential point. 53

68 model expansionary policy can move the economy towards fully employment. But this should remind us of Hicks non-keynesian model. As De Vreoy puts it, Modigliani rebaptized Hickss classical model as the Keynesian model (2000, p.307). From the perspective of the Hicks framework, Modigliani has two classical models. Due to its influence, Modigliani s contrast between the classical and Keynesian models should be familiar. The models are exact in 7 equations and the consumption identity. They differ only in the parameters of the labor supply equation (9) that completes the model. 27 (1) M = L(r, Y ) (2) I = I(r, Y ) (3) S = S(r, Y ) (4) S = I (5) Y = P X (6) X = X(N) (7) W = X (N)P (8) C Y I (9) W = αw 0 + (1 α)f 1 (N)P 27 Modigliani also describes a crude classical model that is identical to the classical except that equation (1) is replaced by the Cambridge cash balance equation. Darrity and Young present additional equations in describing Modigliani. For example, they include both an exogenous money supply equation (M s = M) and the money market equilibrium condition (M d = M d ). These two equations are certainly implicit in Modigliani s analysis, but it is also noteworthy that he does not make them explicit in his direct presentation of the two models. If their implicit existence is necessary for understanding Modigliani s construction of the IS-LM model, their explicit absence is a clue as to Modigliani s own understanding. For instance, that he takes an exogenous supply of money for granted, and not as part of the model per say, is illustrative of his notion of money. 54

69 The notation is standard. 28 For classical model, the value of α is zero. In the Keynesian model it is either zero or one depending on the level of unemployment: 1 if N N 0 α = 0 if N > N 0 where N 0 is the level of full employment. 29 The only difference between the two models is the shape of the labor supply curve. In the classical model it is always upward sloping, and in the Keynesian case it is perfectly elastic below full employment and upward-sloping beyond. In the space of interest rate and money income, the IS curve is downward sloping up until full employment at which point it becomes flat. Beyond that point any expansion is simply inflationary, and the interest rate remains fixed because the real value of investment that it pays to undertake at any interest rate is unchanged since yields and costs change in the same proportion (1944, p.59). Modigliani views the determination of money income as prior to (physical) output. The IS-LM model ( IS-LL at the time) represents what Modigliani calls the monetary part of the system (ibid., p.65), and at least in terms of the logic of his presentation, determines the nominal income before the level of output, as determined by the real part of the system, gives us a price level. Since capital is assumed fixed, the sole determinate of output for a given production technology is labor, hence the centrality of labor supply (and wages). In the Keynesian specification, the N* (below full employment) is determined by: w 0 = X (N) Y X 28 M is the demand for money, I investment, S savings, Y nominal output/income, P price level, X physical output, N employment, and W the wage. 29 Modigliani actually uses a β in the second term of (9) but defines it as (1 α). 55

70 where Y* is the nominal output determined by the monetary section (IS-LL). Because the wage is fixed, nominal output is not neutral. The neutrality of the monetary part of the economy in both the classical and Keynesian full employment case is straight forward. Equilibrium in the labor market reduces to: F 1 (N) = X (N) where nominal output has no influence on the level of employment or real output. The link between rigidity and non-neutrality is so familiar to the contemporary economist that we might miss the novelty of Modigliani s arguments. This is not to say he was the only one advancing a rigidity interpretation of Keynes, but that amongst the multiple understanding of macroeconomy during the period this was but one. Modigiliani provides evidence of this diversity by viewing the linkage between rigidity and Keynesianism as insufficiently recognized: It is usually considered as one of the most important achievement of the Keynesian theory that it explains the consistency of economic equilibrium with the presence of involuntary unemployment. It is, however, not sufficiently recognized that, except in a limiting case to be considered later, this result is due entirely to the assumption of rigid wages and not to the Keynesian liquidity preference. Systems with rigid wages share the common property that the equilibrium value of the real variables is determined essentially by monetary conditions rather than by real factors. (ibid., p.65) The basic logic of the classical and Keynesian models in Modigliani s 1944 paper are presented in Figure 2.1. The critical point I want to make is that while only the classical model is strictly dichotomous, they are both dualist. This dualism is apparent in a number of respects. Modigliani s language makes clear that even the 56

71 monetary sectors of the model has real effects, the economy is still thought to be constituted by real and monetary parts whose interaction is the object of analysis. The mathematical-logical relationship between these two parts continues in this dualist direction. Figure 2.1. Modigliani s Keynesian and Classical Models as of 1944 Monetary Y Monetary Y w 0 P P Real X Real X As Figure 2.1 depicts, the difference between these two models is that in one case the dualism is strictly dichotomous, and in the other case there is a short circuit between the dual sectors. The conceptual condition of existence for this particular theory of the non-neutrality of the monetary sector is the classical model that presupposes a dichotomous dualism. The Keynesian model is the classical model that fails. The classical model is a Keynesian model that doesn t fail New Classicals The message of the previous section is that the Keynesian break from dichotomy was not a break from ontological dualism, of which the classical model was only an exceptionally pure case of. I ll now turn to the relationship between this shared dualism and more recent macroeconomics. In particular I want to consider how the realist dualism as it exists in the old Keynesian model, has helped shape New Keynesian economics. From our vantage point there is no singular New Keynesian model. At the very least there are two New Keynesian types of models (Greenwald 57

72 and Stiglitz, 1993b). The realist dualism can help us understand both the intersection and point of contention between the two. 30 Because Mankiw has been key to both the development and presentation of New Keynesian economics, his views on Keynesianism itself are of interest. His critique of the real business cycle approach is a nice opportunity to see his own view on the distance between Keynesians and classicals, as well as New Classicals and New Keynesians. He presents the methodological choice of the macroeconomist in simple either/or terms: The professor of macroeconomics must in some way deal with the classical dichotomy. Given the assumptions of Walrasian equilibrium, money is largely irrelevant. The macroeconomist must either destroy this classical dichotomy or learn to live with it. Keynesian macroeconomics destroys the classical dichotomy by abandoning the assumption that wages and prices adjust instantly to clear markets. This approach is motivated by the observation that many nominal wages are fixed by long-term labor contracts and many product prices remain unchanged for long periods of time. Once the inflexibility of wages and prices is admitted into a macroeconomic model, the classical dichotomy and the irrelevance of money quickly disappear. (1989, p.80) In my reading, this either/or is either a false choice in the sense that one can both destroy and live with the classical dichotomy, or Mankiw is wrong in his characterization of the Keynesian macroeconomist s decision. Certainly the mainstream Keynesian must live with the dichotomy because his/her own model is the dichotomy 30 Other factors have without doubt shaped the development of macroeconomics. These factors include political shifts, the economic instabilities of the 70s, methodological trends in formal theory, and empirical techniques. However, none of these are sufficient conditions alone. Simple scatter plots - think Phillips curve - do not in of themselves mandate any particular change in economic research. I simply add the dualist ontology of macroeconomics to this list of factors. 58

73 with a failure. If this model was destroyed, and left behind, its Keynesian version would cease to be intelligible. The Keynesian model may undermine, critique, or challenge the classical dichotomy but it does not destroy it. This is not a mere issue of semantics and the consequences are significant. In Mankiw s framing of the macroeconomic choice, the persistence of the classical dichotomy is invisible. Consider an innocent statement from Neary and Stiglitz - It is well-known that, if all prices are flexible, all factors (which are not in absolute surplus) will be fully employed in equilibrium (1983, p.199). 31 How exactly is this known? Unless price flexibility was defined so as to make this a simple truism this position is not trivial without a specific economic model in mind. Nonetheless, this fact is well-known because the classical model, as either a benchmark from which the Keynesian model is derived or the result of removing the failures from the latter, is itself well-known. It persists. We live with it. With respect to Figure 2.1, New Keynesian economics is simply the project of theorizing the conditions of existence of the arrow that bridges the divide between the real and the monetary. As in the case of the original model, the object of New Keynesianism research is unintelligible outside of this dualist ontology. This continuity should be clear for the New Keynesian approach of associated with Romer, Mankiw, and others. 32 Here, the research objectives include (1) providing the microfoundations (required by the standards of orthodox economic methodology) for rigidity and (2) the theoretical and empirical study of the precise relationship produced by the short circuit between the real and monetary. 31 It is possible that the later Stiglitz might be more careful when discussing price flexibility given his interest in distinguishing his New Keynesianism from other variants. 32 A non-exhaustive sampling of this tendency includes Mankiw (1985), Ball et al. (1988), Ball and Romer (1990), Blanchard and Summers (1986), Blanchard and Kiyotaki (1987), Mankiw (1989), Akerlof and Yellen (1985; 1990), and Gordon (1981). 59

74 Less obvious is the how the New Keynesianism associated with the work of economists such as Stiglitz and Greenwald fits into this tradition. 33 For example, Greenwald and Stiglitz (1993b) take care to distance themselves from the standard rigidity framework, claiming that given information imperfections, increased price flexibility may only make recessions worse. This New Keynesian approach seems to pose a direct challenge to the dualism we ve described. In what sense is this still New Keynesianism then? The simple answer is that both variants use microfoundations to study economic fluctuations and the non-neutrality of money. This simple answer suggests another. To the extent that they take the same object of analysis, seeking to explain the same problems, they also share the dualist presuppositions that make these concerns intelligible. Whereas the first variant attempts to produce microfoundations for the traditional linkage between the monetary and the real (rigidities), this latter version advances a new type of short circuit. In each case a failure in the real economy creates (1) broader economic failures and (2) non-neutralities. These New Keynesians are both repetitions of the realist dualism at play in the construction of the old version. This doesn t preclude repetition with a difference. The imperfect information approach to non-neutrality is novel and an example of the way in which in appeals to the real evolve along with notions of what the real is. It does not seem to be a coincidence that models attributing inefficiency to information failures arise after the development of the efficient market hypothesis that associated efficiency with perfect information regarding the (real) fundamentals. If rigidity, as a critical concept of Keynesian economics, persists it is because flexibility is key to making sense of the relationship between the monetary sector and the real sector in dichotomous models. Dropping the dichotomy, while maintaining 33 See Greenwald et al. (1984) and Greenwald and Stiglitz (1993a). 60

75 the dualism, involved finding a short circuit or failure in this logic. Similarly, the increased prominence of questions of information in later models with dichotomytype implications, made necessary - in absence of a fundamental rethinking of the methodological presuppositions of macroeconomics - theories of information failures. 2.6 Conclusion The critique of the realist dualism does not in any way imply that abandoning its tendencies is simple. On the contrary, it is precisely the difficulty of thinking of the economy and money without a notion of a real and its other, that makes an understanding of its effect important. In the lonely last instance, it may even be impossible and undesirable to completely abolish this dualism. For example, is it really possible to abandon the concept of the real wage? One of the misconceptions of deconstruction is that it is strictly destructive. It takes oppositions and obliterates them. This is a misconception because many of the objects of deconstruction - consider race, nation, gender, presence, nature, etc. - are quite simply not things we can just leave aside on the basis of a good philosophical argument. Critiques of nationalism, for example, can not prevent the nation from being fundamental to many individuals worldview. At the same time, our inability to act without some reference to these concepts does not render insignificant critical evaluation of their uses and abuses. The nation is neither something we accept as is, nor simply forget about. The same is true for the real economy. At some point, and in some sense, the distinction between a real and nominal value may be unavoidable. However, at what point this occurs, and the sense in which the terms (i.e. real and nominal) are to be applied, are important methodological questions that are precluded by the naturalizing language of the real. By denaturalizing these metaphors/models and advancing an alternative ontology, we can retheorize the problems that have characterized monetary 61

76 economics - in some cases suggesting new solutions. 34 The realist dualism is productive. Economic thought of a dualist nature has not been sterile. Nonetheless, it has its limits - some of which may be surmounted by abandoning an ontological distinction between the real and monetary. Unfortunately, the philosophical-methodological level of this dichotomy is often overlooked, leading economists to oppose one variant of dualist thought with their own. The next chapter shows how Marx s own use of the language of real, symbolic, and imaginary money undermines ontologically dualist interpretations of these terms. While one strategy of opposition to the realist dualism may involve completely abandoning this language, I will show an overdeterminist account of the real, imaginary, and symbolic can both (1) produce an alternative monetary ontology and (2) help us make sense of the persistence of the essentialist ontology. In my reading, what Marx shows is how the various forms and functions of money are all equally real (and/or equally less real), but are experienced as otherwise. The perceived superficiality of certain forms/functions of money is but part of their (social) reality. And alternatively, the crude objective reality of other forms and functions is just part of their social contingency. 34 My dissertation focuses on this reframing of the problem of non-commodity money in Marxian economics, but similar projects are possible in other economic paradigms. 62

77 CHAPTER 3 MARX AFTER THE LETTER: OVERDETERMINISM AND REAL MONEY 3.1 Introduction: RIS In the previous chapter I looked at ways in which an ontology of real economy and less real money conditioned, and from the perspective of overdetermination impeded, monetary thought in general. The remainder of the dissertation will focus on Marxian economics. One of my arguments is that the absence of any neutral pretheoretic notion of the real prevents this dualism from operating identically across paradigms. As real takes on different meanings across these paradigms, the conceptualization of money as its economic other also varies. The methodological basis for an overdeterminist Marxian theory of money involves locating and critiquing the particular notion of the real in operation within Marxian discourse. As discussed in Chapter 2, Marx uses the language of real, imaginary, and symbolic (RIS) when discussing money. It is not difficult to see how this may lend itself to essentialist readings privileging the real over the merely imaginary or symbolic. From an anti-essentialist perspective, one strategy for resisting the subsumption to the real (form or function of money) is to abandon this language. Indeed, as my dissertation is in large part a critique of the realist dualism, one may infer a desire to banish any such realist references. In this chapter I argue that this is not necessary, and may indeed be a mistake. While following chapters show ways in which Marxian economics has indeed progressed along essentialist and dualistic lines, I ll show here how Marx s use of these categories actually offers a powerful critique and overdeterminist alternative. 63

78 This overdeterminist interpretation of Marx on the RIS is a product of reading the contradictions and tensions found in Marx s positions on money through a Lacanian lens. While the psychoanalytic work of Jacques Lacan has gained a certain infamy for its difficulty, I argue that Lacanian theory provides a straightforward way to think about the categories of RIS within Marx that (1) undermines essentialist interpretations of real money, and (2) helps make sense of the tensions in Marx s monetary theory as consequences of the complex and contradictory character of the RIS. These tensions are not confusions, but rather the product of the overdetermined relationship between money s real, symbolic, and imaginary aspects Popular Monetary Education A small monetary experiment I encountered in Providence, Rhode Island further illustrates why the categories of RIS can not, or should not, be so easily abandoned. An artist going by the name Obadiah Eelcut began issuing his own paper currency, each with a portrait of a person he knew one on side and their favorite bird on the other. 1 The denomination of each and every note was zero and the quite fitting name he gave to this currency was Noney - rhymes with money. However large your stack of Noney, you knew exactly how much you had, none. Presumably the person behind Noney hoped to (1) make a point about the symbolic, fictitious, or empty nature of at least some forms of money and (2) see if his money could catch on. I don t want to attach any profound significance to Noney. The monetary questions, hopes, and fears behind such a project are not uncommon, which is precisely the point. Even if we do not accept essentialist notions of real, symbolic, and imaginary money, an overdeterminist approach to money must take into account the heterogenous and ever-changing social conceptions that money is real, symbolic, or 1 The website for the project can be found at: 64

79 imaginary as part of the constitution of monetary phenomena. For example, although I oppose the characterization of gold as a real money, ontologically prior to supposedly more social monetary forms, I recognize this view itself as an overdetermining contributor to the particular social constitution of gold. Another example from Rhode Island addresses this point. In junior high school a teacher once taught me that US currency had value because it was backed by gold. While not being a spring chicken, I am not old enough for him to have been even remotely correct. There are a few lessons in his misleading lesson. The obvious one would be that belief in a real money, stored away somewhere waiting for you to claim it, may act as a condition of existence for another form of money. Of course, as in this case, this real money may not actually be waiting for you. Consequently, we are left wondering exactly what sort of real fails to exist. There are two avenues for taking this lesson further, one which broadly leaves the categories of real and symbolic as is, and another that challenges them. One interpretation proceeds along the self-fulfilling prophecies line. A non-commodity form of money works (has value in some sense, are accepted for commodities, etc.) because we believe it does. Alternatively, if we lost faith in these instruments of money they would cease to function as money. They are not really money without our belief in them. This is quite similar to the familiar logic of a bank run. Fractional reserve banks work because we believe they work. If we were to lose faith in the ability of these institutions to give us our money, they would have difficulty meeting their obligations to depositors. However, this interpretation is at once too idealist and too (crude) materialist, betraying a dualism. Money is simply in our heads, a belief brought into the world. However, this is only because some form of real money is absent. For example, in the absence of fractional reserve banking the ability of banks to satisfy any depositor would be independent of beliefs. Similarly, if money really were (backed by) real gold 65

80 money, our beliefs or faith would cease to really matter. To hazard a pun, the notions that money may simply be a social illusion and that it is some pre-social piece of brute reality are two sides of the same coin. 2 An alternative way to approach the relationships between what appears to us as real, symbolic, and imaginary is to interrogate these categories. If the real money isn t there, what sort of real is it really? Or, if the symbolic money depends on an image of the real, not really stored away somewhere, on what does this imaginary real depend on? Perhaps this particular image of the real was a product of symbolic money itself. Yes, my teacher s belief in a reserve of real money provided a condition of existence for his use of paper notes, but did not the processes and practices related to this symbolic money also provide conditions of existence for his mistaken belief in a vault of gold? By asking and answering such questions we would begin to think about the aspects of money experienced as real, imaginary, and/or symbolic as overdetermining one another, in every and any monetary system, whether or not vaults of precious metals exist. Obviously, such an approach would significantly transform these very categories from their familiar usage. What this chapter proposes, and illustrates, is that the Lacanian understanding of the RIS is adequate for this task Outline The following section will provide a summary of Marx s treatment of money in Capital (Vol. 1) with particular emphasis on the role of the RIS in his description of money s various forms and functions. I ll argue that despite explicit insistence on the priority of money s real forms/functions, the text offers a more nuanced and tenuous 2 Without doubt it would be hard to find many academics who would openly accept the idea that money could ever simply be a pre-social piece of metal, but such an idea exists implicitly in (1) many popular ideas about monetary (mis)management and (2) popular and scholarly reflections on how a certain form of money is now a social construction. 66

81 status of this real money in it s arguments and logic. I ll then consider the stakes this issues raises from an overdeterminist perspective. While overdeterminist analysis has targeted the relationship between money and other aspects of economy, less attention has been paid to thinking about the multiple aspects, dimensions, forms, or functions of money itself in an overdeterminist fashion. 3 Once I document the tasks and problems posed by overdeterminism, I begin to produce an anti-essentialist methodological framework inspired by Marx and Lacan. I will begin summarizing the work of Jean-Joseph Goux, who has himself attempted to produce a Marx-Lacan understanding of money, taking note of the points I take from him and grounds on which we part ways. I ll then outline a simple understanding of the RIS in Lacanian terms. The final section bring this conceptualization of the RIS into the ambiguities in Marx s insistence of the real to provide this overdeterminist framework for monetary forms and functions, and by extension the problem of value in the context of various non-commodity forms of money. 3.2 Tensions in Marx s Real Money While this dissertation does draw on the later volumes of Capital, I find a special significance in the first part of Volume 1 for the questions related to non-commodity money, value, and the notion of real economy/money. This is despite the fact that Volume 3 contains significantly more material on the financial subsumed class processes so closely related to both state-issued fiat and bank-generated credit money. While that material will indeed be very useful in theorizing non-commodity money and its relationship to class, pursued largely in Chapter 6 of this dissertation, it lacks details on the character of money s forms and functions in relationship to value. 3 Resnick and Wolff (1987), the seminal contribution to the overdeterminist class analytic tradition itself contains much commentary on money and credit. Other contributions, including Roche (1981; 1985; 1988), Russell (2007), and Kristjanson-Gural (2003; 2008), will be discussed in the following chapters. 67

82 If Volume 3 is the place to find analysis of critical non-commodity money processes, Volume 1 contains the methodological material for making sense of categories such as (non)commodity money, real, symbolic, or imaginary money, etc. Furthermore, as any text offers multiple readings, the interpretation of these categories is of great methodological consequence. From a methodological perspective, essentialist interpretations of the categories, producing a Marxian variant of the realist dualism, delimit the possibilities of an overdeterminist analysis of these subsumed, nonclass, and/or even class processes related to the operation of non-commodity forms of money The Insistence of the Real Marx s writing on money exhibits a certain insistence on the real, where temptations to think of money as imaginary or symbolic are warned against. Ultimately, despite any appearances suggesting otherwise, it is money s real form and function that is essential. Such an insistence betrays the existence of such temptations; we are justified asking from where they come. Does this vigilance against folly raise the possibility it may be more than just folly? We could isolate two distinct sources of these temptations. First, they come from proponents of erroneous monetary theories, motivated by idealist philosophy or uncritical reformism. Here, at least from a Marxian perspective, this insistence lends no credence to their ideas. However, I will argue that a second source of these temptations is the text of Capital itself. Marx s analysis of money, its various forms and functions, requires an insistence on the real, not simply to critique (exogenous) theoretical opponents, but as a response to the (endogenous) undermining of the concept of real produced by the text itself. Unlike the debate between Marx and his opponents, this second, endogenous conflict, between the insistence of the real and the temptations produced in its undermining, does suggest that from a Marxian perspective we should take the symbolic 68

83 and imaginary seriously. The question is how, and what to make of this tension. I will argue that the appropriate overdeterminist response is to resist the resolution of this tension into one pole - concluding that ultimately, in the last instance, money is either (1) just a symbol or product of the (social) imagination or (2) a material chunk of real commodity money from which other epiphenomenal monetary forms/functions are derived. On the contrary, we should read these tensions in the text as the impossibility of a simple, straightforward, and non-contradictory relationship between the real, imaginary, and symbolic aspects of money. What is Marx doing when he insists on the real? 4 Marx s realism in the monetary context is in part the product of his political motivations and broader social-economic ontology. Where did the illusions of the Monetary System come from? The adherents of the Monetary System did not see gold and silver as representing money as a social relation of production, but in the form of natural objects with peculiar social properties.(marx, 1976, p.196) As Marx was often explicit about, theories of money have important political consequences. For example, the Chapter on Money from the Grundrisse (Marx, 1973) begins with a critique of utopian socialist banking and monetary reforms meant to improve the capitalist economy in terms of stability and some notion of equality. Marx has been caricatured as having a crude metallist theory of money that naturalizes the social character of money along similar lines as orthodox economics. However, leaving aside the specific (non)commodity status of money in the Grundrisse or elsewhere, it is clear that Marx is not reducing economic phenomena to physical properties. 4 We might also think of it as the real insisting on itself. Again, even if we deprive any monetary form of the privilege of being ontological prior, why should we be surprised that a the form (gold commodity money) experienced as really real includes in its concept an insistence on this special status? 69

84 It is not the brute materiality of gold (the illusions of the Monetary System) that limits utopian attempts to reform capitalism, but rather the social relations of capitalist production that the utopians leave off the table when discussing banking and monetary changes. That he opposes both utopian socialist and mercantilist ideas about money, despite their radical differences on the material of money, is evidence that the distinctiveness of Marx s monetary thought resides in the emphasis on social relations. While this does not necessarily acquit Marx from the charge of advancing a commodity theory of money, he is certainly not a simple metallist. The theoretical allure of gold is that as commodities they are immediately linked to - produced in - the social processes Marx wants to highlight - class. 5 This is the link between the dualism of real/monetary economy and the dualism of real/less-real money. Because essentialism in the Marxian tradition is typically of a productivist sort (the real economic as the sphere of production), the conceptualization of real money is overdetermined by this emphasis on production. And while productivism is a problem of its own, what follows will seek out the tensions that undermine, and provide an alternative for, this tendency. The remainder of this section will outline the appearance and development of money in Volume 1 with the focus on this dialectic of insistence and undermining at work in the treatment of the categories of RIS The Money-Form Money first appears in Capital as a particular form of value. Marx s analysis here is well-known so I will not repeat it in great detail, but a brief outline is of use. 5 The difference between even a determinist Marxian commodity theory of money and a credit approach emphasizing faith in money has nothing to do with the latter being more sociological. For example, it is sometimes said that credit based money is social because it depends on relationships of faith and trust, as if such relationships are inherently more social than those involved in production. 70

85 The money-form is the final step of a (presumably) logical and/or historical series of developments. 1. Simple, Isolated, or Accidental (xa = yb). In this form of value, x amount of commodity A has a value equal to y of commodity B. This is simple and isolated in that it is not systematic. It does not involve the totality of commodities, and while the two commodities play distinct roles with respect to each other (what Marx called the relative and equivalent forms), the commodities that play this role are random or accidental. Neither A nor B have a particular socially designated role. 2. Total (xa = zb, yc, qd...). In this form, a quantity of a commodity is expressed as equal to a quantity of every/any other commodity. Like the previous form there is no particular commodity that plays the the specialized role of expressing value. Unlike the previous form, we no longer have an isolated relationship, but an equality constituted by the totality of commodities. 3. General (zb, yc, qd... = xa). The general form can be understood as the reversal of the total form. Instead of one commodity having its value expressed by different amounts of every other commodity, every other commodity expresses its value through a single commodity. 4. Money (zb, yc, qd... = xg). The movement from the general to the money form is the simplest but nonetheless of great consequence. Formally, nothing has changed. What makes the money form is that one commodity (G, gold as the money commodity) attains a social monopoly on this role of general equivalent. Thus, the origin of money is to be found in the relationship between commodities - or rather the social relations behind commodities. Two points on the character of 71

86 this origin story are important. First, money is understood as one of the totality of commodities. As we move on to consider monetary phenomena further, its baptism as a commodity has the tendency to render non-commodity forms as derivative. In other words, the original, and therefore perhaps real/essential, form of money is the commodity. Second, while money is a commodity, it is the money commodity. It is not just any commodity. This origin of money narrative includes a tension between money as commodity and money as other than commodity that will later express itself in terms of the RIS. But only the action of society can turn a particular commodity into the universal equivalent. The social action of all other commodities, therefore, sets apart the particular commodity in which they all represent their values. The natural form of this commodity thereby becomes the socially recognized form. Through the agency of the social process it becomes the specific social function of the commodity which has been set apart to be the universal equivalent. It thus becomes - money. (Marx, 1976, p.180) Not only does this notion of social action - the agency of the social process - distance Marx s particular commodity origin of money narrative from the Mengerian agency of rational atomistic individuals story, it produces a concept of money that is both less and more than a commodity. It is a commodity, but an excluded commodity; one that is set apart and in the process given a particular social role. This concept of the money commodity includes both the idea that (1) money is the privileged, most desired, commodity and (2) money is but a mere function allowing us to attain real commodities. For Marx, the contradictions we find in money, or in between money and the commodity, are the product of this social process that constitutes the money 72

87 form, and ultimately the contradictions in the commodity with its dual character as use-value and value. 6 The footnote associated with the previous quote contains Marx s well-known Pope metaphor: From this...petty-bourgeois socialism, which wants to perpetuate the production of commodities while simultaneously abolishing the antagonism between money and commodities...one might just as well abolish the Pope while leaving Catholicism in existence.(ibid.,p.181, fn.4) Marx s critique of utopian and petty-bourgeois monetary politics is not necessarily motivated by the conviction that money/exchange is insignificant (in relation to production). Are we to believe Marx found the Pope to be unimportant with respect to Catholicism? On the contrary, the argument is not that money or the Pope are insignificant, but that their importance is not as we imagine it. They are not simply independent, alien powers that externally control us, but are rather the products of the totality of social relations (commodity production or the Catholic Church) they head. 7 Consequently, the contradictions and antagonisms we seek to ameliorate or 6 Money is opposed to commodities as the external expression of an internal contradiction: [E]very change of form in a commodity results from the exchange of two commodities, namely an ordinary commodity and the money commodity. If we keep in mind only this material aspect, that is, the exchange of the commodity for gold, we overlook the very thing we ought to observe, namely what has happened to the form of the commodity... Commodities first enter into the process of exchange ungilded and unsweetended, retaining their original home-grown shape. Exchange, however, produces a differentiation of the commodity into two elements, commodity and money, an external opposition, which expresses the opposition between use-value and value which is inherent in it. (ibid., p.199) 7 I would not disagree with the possibility of a determinist reading of Marx s critique. Such an interpretation, where the constitution of money by the totality of social relations is understood as unidirectional, non-contradictory, and determined by the forces/relations of production can quite easily be produced. I disagree with the assumption a determinist interpretation is necessary. This constitution can just as easily be interpreted as a process of overdeterminism. 73

88 abolish are not the consequence of money (or the Pope) in itself, but rather this totality of relations. The contradictions in the commodity-form, which overdetermine the constitution of the money-form and its own antagonism between being and not-being (just) another commodity, also help produce confusion over the ontology of money. The following passage is lengthy but should not be passed over because it marks the arrival of the imaginary, symbolic, and (implicitly) real in Capital: We have seen that the money-form is merely the reflection thrown upon a single commodity by the relations between all other commodities...the process of exchange gives to the commodity which it has converted into money not its value but its specific value-form. Confusion between these two attributes has misled some writers into maintaining that the value of gold and silver is imaginary. The fact that money can, in certain functions, be replaced by mere symbols of itself, gave rise to another mistaken notion, that it is itself a mere symbol. Nevertheless, this error did contain the suspicion that the money-form of the thing is external to the thing itself, being simply the form of appearance of the human relations hidden behind it. In this sense every commodity is a symbol, since, as value, it is only the material shell of the human labor expended on it. But if it is declared that the social characteristics assumed by material objects, or the material characteristics assumed by the social determination of labour on the basis of a definite mode of production are mere symbols, then it is also declared, at the same time, that these characteristics are the arbitrary product of human reflection. (Marx, 1976, pp ) Marx immediately worries about the consequences of the money-form as a mere reflection. If it is only a reflection, might any arbitary object do the reflecting? He attempts to counter this immediately through the distinction between money s value 74

89 and value-form. The danger of confusing the two, according to Marx, is an idealism in which the value of gold and silver is imaginary. He also takes this moment to attack the idea that money is merely symbolic. But unlike the previous critique, he instantly qualifies his position. Money is not just a symbol, but it is also a symbol. Indeed, even as a commodity it is necessarily symbolic. This is an important point. I ultimately want to argue that money is never merely real, merely imaginary, nor merely symbolic because it is always already real-imaginary-symbolic. While Marx seems to outright reject the imaginary dimension here, we do see that the rejection of the symbolic is strictly of the merely symbolic. As we will see, the imaginary itself is not completely rejected either. The danger in the mere symbolic is the idea that the economy is the arbitrary product of human reflection. While this critique has a determinist reading, where a deterministic real economy of production is opposed to this arbitrary product, it is also well at-home within an overdeterminist tradition. To say that money, value, circulation of commodities, etc. is the mere product of unimpeded human reflection is a thoroughly essentialist position, which can be countered with an alternative deterministic essentialism, or overdeterminism. Already in money s very form, as a universal equivalent without consideration of its various functions, we encounter contradiction and multiplicity marked by this tension between the real and the merely symbolic/imaginary. As Marx analyzes these functions we continue to see an insistence of the real, as well as the deferral of its priority, while money acts as (1) a measure of value, (2) a means of circulation, and (3) money Wildest Theories: The Measure of Value Because money originates as a universal equivalent (of/for value) it makes sense for Marx to proceed onto its functions with the measure of value role. In actuality, 75

90 Marx considers two functions, often treated together, that he considers distinct - money as a measure of value and as a standard of price: As measure of value, and as standard of price, money performs two quite different functions. it is the measure of value as the social incarnation of human labour; it is the standard of price as a quantity of metal with a fixed weight. As a measure of value it serves to convert the values of all manifold commodities into price, into imaginary quantities of gold; as the standard of price it measures those quantities of gold...but gold can serve as a measure of value only because it is itself a product of labor, and therefore potentially variable in value. (ibid.,p.192) A pair of oppositions exist here. First, we may oppose the measure of value, determined by the value of gold as a product of labor, with the standard of price, decided upon by the state which as relative autonomy in the naming of different quantities of gold. This is a distinction between an internal (with respect to the economic totality) necessity and an external contingency. Marx compares this nominal act of the state to the naming of persons - I know nothing of a man if I merely know his name is Jacob (ibid., p.195). Nothing is known because there is no necessary link between an individual s name and the individual. Similarly, there is nothing essential about the name given by the state to various quantities of gold. As a standard of price the state is free to name any weight of gold a pound, yet as a measure of value gold functions according to its actual weight and the associated quantity of labor socially necessary for its production. The second opposition is internal to the measure of value function itself. First, the measure of value, in opposition to the state denominated standard of price, depends on actual gold produced by labor. Behind the arbitrary, nominal, symbolic standard of price lurks the real gold commodity. However, at this moment real gold does not 76

91 operate in its actual physical form. This actual substance is the condition of existence for the money form, but the money used as a measure of value is the idea of this gold. From a practical perspective this imaginary dimension of the measure of value function is hardly a discovery at all. Everyone knows that gold or silver are not required to be present in their physical form when we use them to measure the value of commodities. This is the case regardless of the notion of value assumed. For example, we could use gold, or any other substance, to express the value of an apple in classical Ricardian, Marxian, or subjective neoclassical terms. Certainly, the theoretical content of such expressions would vary radically, and methodological and epistemological problems exist in knowing/calculating values, but the existence of physically present gold is not one of these barriers. If not pathbreaking by any means, the significance in this context is that just when we expect to see cold, hard commodity money in its brute physical form, its appearance is temporarily deferred. At which point Marx warns us to maintain our bearings, and resist going wild, in response to this deferral: In its function as measure of value, money therefore serves only in an imaginary or ideal capacity. This circumstance has given rise to the wildest theories. But, although the money that performs the functions of a measure of value is only imaginary, the price depends entirely on the actual substance that is money. (ibid., pp ) From a deterministic perspective, what Marx refers to as the wildest theories could be said to have mistaken an appearance for an essence. Seeing that money need not exist in a present physical form at one moment - the moment of measuring value - they miss the functioning of the real actual substance that strictly determines the prices expressed by imaginary money. This is not the only reason money should not be taken as simply imaginary, despite the character of the measure of value function. Real money need not be present in 77

92 order to state the price or measure the value of a commodity, but in order for this value to be realized it must be purchased. At this moment the mere idea of gold is insufficient. As Marx puts it: Though a commodity may, alongside its real shape (iron, for instance), possess an ideal value-shape or an imagined gold-shape in the form of its price, it cannot simultaneously be both real iron and real gold. To establish its price it is sufficient for it to be equated with gold in the imagination. But to enable it to render its owner the services of a universal equivalent, it must be actually replaced by gold. (ibid., p.197) The Honesty of Paper Money: The Means of Circulation Real money, in its actual substance, never quite appears in itself in Marx s analysis of the measure of value function. This is despite Marx s insistence that it is what determines prices. Even suspending methodological suspicion over this problematic distinction between the mere appearance and true hidden essence, one must still wonder when and how this real money will present itself. Again, even if we grant this essentialism temporarily, there must be some moment at which this actual substance of gold enters the scene to assert itself. This hard cash only lurks within the ideal measure of value (ibid., p.198), but we are assured it will appear at the moment of realization, when money operates as a means of circulation. What I will show is that yet again real money is compromised. Despite repeated claims that it is money s actual real gold substance that is ultimately determinant, there are contradictions and tensions. There are three I want to point out in Marx s analysis of money as a means of circulation. First, we have the continued dialectic between the real/ideal and commodity/money. At the end of the section on money as a measure of value, the idea put forth was that real money must become present as a means of exchange to realize the value of 78

93 commodities. Here, money is the real substance that realizes an ideal value. However, Marx also holds that this process of exchange also involves a realization of money, implying that this real character of money is not simply the precondition of commodity exchange, but at least in part the product money s operation as a means of circulation. Second, Marx begins to assert a hierarchy between money s multiple functions that is difficult to maintain. Finally, we see that in playing the role of a means of circulation money has a spontaneous tendency to become a symbol. In what sense is money realized? How, and why, do commodities and money realize each other? The answer is yet again to be found in the contradiction between use-value and value. Prior to the moment of exchange, when money operated as a measure of value, the commodity and the money commodity were mirror images. On the one hand, both sides of this opposition are commodities, hence themselves unities of use-value and value. But this unit of differences is expressed at two opposite poles, and at each pole in an opposite way. This is the alternating relation between the two poles: the commodity is in reality a use-value; its existence as a value appears only ideally, in its price, through which it is related to the real embodiment of its value, the gold...inversely, the material of gold ranks only as the materialization of value, as money. It is therefore in reality exchange-value. Its usevalue appears only ideally in the series of expressions of relative value within which it confronts all the other commodities as the totality of real embodiments of its utility. (ibid., p.199) The commodity is a real use-value but only an ideal value. The bread at the bakery may be good to eat, but whether it will be socially demanded depends on it attracting money. Money is the real representative, equivalent, or materialization of value but its use-value is only ideal. Money has no use in its own, other than ideal capacity to attain objects of real utility. In debt to Shakespeare, Marx made this 79

94 point more concisely, and poetically - We see then that commodities are in love with money, but that the course of true love never did run smooth (ibid., p.202). Each needs the other, but need is not a sufficient condition for its own fulfillment. Marx s argument follows from his understanding of the contradictions in the commodity form, and is not in that sense a contradiction in his analysis. The tension that does arise is that in this analysis money is not fully real prior to exchange - It became real money because the commodities, through their alienation, suffered...a transformation (ibid., p.204) in their sale. This notion of real money constituted through exchange is at odds with Marx s subsequent attempt to characterize the means of circulation function as secondary to both (1) real commodities and (2) money as a measure of value. As with the ideal measure of value, Marx is intent to immediately counter the wildest interpretations that may spring from his analysis. If money is realized while acting as a means of circulation, it may be thought this is the essential function of money. We may begin to think of the quantity of money thrown into the economy as the critical economic variable, attributing any fluctuation in output to it. If insufficient commodities were realized, perhaps there was a shortage of money to realize them. And if real money is simply that which is itself realized through exchange, creating more of any arbitrary form of money should solve the problem. In addition, Marx is also concerned about the quantity theory essentialization of the means of circulation/exchange function with its own problematic neutrality results. Consider a simple equation of exchange, MV = P i UV i, where M is the stock of money in circulation, V its velocity, and P i UV i is the sum of use-values multiplied by their respective prices or aggregate nominal output. 8 Marx criticizes theories that 8 This is typically written as MV = P Y where P is the price level and Y is the real level of output. My notation is mathematically equivalent, but doesn t deploy the notion of a level of real use-value outputs that can be added together prior to, or without reference through, prices. 80

95 view causality as running from right to left, whether the accommodating variable on the right-hand side of the question is use-value output (non-neutral money supply) or prices (neutral money supply). Marx characterizes both ideas as superficial, based on appearances: Money constantly removes commodities from the sphere of circulation, by constantly stepping into their place in circulation, and in this way continually moving away from its own starting-point. Hence although the movement of money is merely the expression of the circulation of commodities, the situation appears to be the reverse of this, namely the circulation of commodities seems to be the result of the movement of money. (ibid., pp ) Such claims could lead to an interpretation of Marx as a member of the real analysis tradition. Despite putting forth an argument for the necessity of money, based on the contradictions in the commodity form, money s movement is epiphenomenal. Ultimately, the essence of circulation is the circulation of commodities, which would be considered logically prior to that of money. 9 This distinction between the essence and appearance of circulation also plays into the hierarchy of monetary functions. Consider the implications of the priority of commodity circulation for the two monetary functions we have discussed so far. Commodities determine the circulation of money. But how? What is the nature of this determination? How do we move from presupposed amount of commodities to the circulation of money as a means of exchange? The answer is through the measure of value function. Given these commodities, we have an aggregate amount of value. The amount of money that will/must circulate 9 Both Chapter 4 and 5 of this dissertation discuss how this priority of commodities influences the theorization of non-commodity money. 81

96 as a means of exchange depends on its value and the velocity of money. This is Marx s well-known critique, and reversal, of the quantity theory. It does however have its own limitations. For example, it prioritizes the measure of value function over money as a means of circulation, despite the latter s role in realizing the former. We have already seen that the sphere of circulation has a gap in it, through which gold (or silver, or the money material in general) enters as a commodity with a given value. Hence, when money begins to functions as a measure of value, when it is used to determined prices, its value is presupposed. (ibid., p.214) This gap is theoretically important. What it implies is that money s value - the condition of its operation as a measure of value - is an external datum introduced into the realm of circulation. It s value, presupposed, influences prices and ultimately, given a quantity of commodities in circulation, the quantity of money as a means of circulation, but the causality moves in one direction. 10 This logic also makes the quantity (and value) of commodities purchased independent of the quantity of money. It presupposes that the course of love does always run smoothly. The process of realization is not contingent, or, at least not contingent upon the quantity of money in circulation. The key qualification that must be made here is that this is an assumption made for the text, not about the operation of capitalism: The division of labour converts the product of labour into a commodity, and thereby makes necessary its conversation into money. At the same 10 Marx s analysis of the presupposition of money s value and its determination of prices, and the quantity of money in circulation is discussed in greater detail in Chapter 5. Similar to the points made here, I will further argue how this very insistence on a real/essential function/form of money contains contradictions that undermine it. 82

97 time, it makes it a matter of chance whether this transubstantiation succeeds or not. Here, however, we have to look at the phenomenon in its pure shape, and must therefore assume it has proceeded normally. (ibid., p. 203) Assuming things proceed normally, a necessary quantity of circulating money will follow from a quantity of commodities, the value of the money commodity, and the velocity of money. This is a simple tautology, given equal exchange assumptions and this interpretation of normal. However, what happens when things do not proceed normally? What happens if there are crises, or even small difficulties, in the process of realization related to the money as a means of circulation? Such a possibility, implied in the characterization of the transubstantiation as a matter of chance, is of course well-accepted within the Marxian tradition. 11 The problem, which we will return to later in the dissertation, is that most of the analysis in this section of Capital assumes this chance away. Therefore, relaxing this assumption, allowing for the abnormal where chance plays its role, must involve a retheorization of the role money plays as a means of circulation with respect to money s value, forms, and functions. We can not simply add the caveat that crises may occur and keep the same exact theory of 11 Marx himself qualified that his opposition is to the idea that money s quantity is the essential matter, and not to the perfectly reasonable notion that money s quantity may matter: It should be mentioned in passing that it by no means follows, from the fact that the popular ascription of stagnation in the processes of production and circulation to an insufficiency of the circulating medium is a delusion, that an actual shortage of the circulating medium resulting from, say, bungling government interference with the regulation of currency may not for its part give rise to stagnation. (ibid., p.218 fn28) Marx is clarifying here that it is not delusional to think that monetary processes could create a problem. Of course they could. The delusion is to always everywhere only imagine that crisis, and the corresponding solution, involves figuring out the ideal way in which to organize a monetaryfinancial system such that the real economy may thrive, without paying any attention to its own problems and contradictions. 83

98 money (its various functions, forms, relationship with commodity production, etc.). Their possibility changes the theoretical analysis of money. Thus far we have encountered an ideal measure of value, ultimately determined by the actual substance of gold and its conditions of production. This gold however need not ever be present when money is a measure of value - the idea of it is sufficient. The price expressed by the measure of value is only ideal and must be realized through exchange. Here money, cold hard cash, must present itself. However, despite this real character of money as a means of circulation (it helps realize commodities and money itself), we see that it too suffers a certain lack. In being theorized as epiphenomenal (a function of commodities), the monetary is rendered less essential than the real economy and the measure of value function gains the privileged role linking these economic spheres. A further ontological lack of money as a means of circulation is its tendency to become a symbol of money. Marx s language on the development of money into a symbol is important. Although symbolic money will be theorized as less essential and real than money itself, its existence is not considered accidental or pathological: The natural and spontaneous tendency of the process of circulation to transform the coin from its metallic existence as gold into the semblance of gold... (ibid., p.222; emphasis added) and [T]he circulation of money itself splits the nominal content of coins away from their real content, dividing their metallic existence from their functional existence, this fact implies the latent possibility of replacing metallic money with tokens made of some other material, i.e. symbols... (ibid., pp ; emphasis added) 84

99 In many respects this description follows the standard dematerialization narrative. Money which was once a real metallic thing gradually becomes simply functional- a semblance. Marx continuously describes this token money a symbol of money, and therefore not fully money itself. Of course this narrative has multiple versions. In one version, this substitution of the symbol for the thing is treated as a perversion of the real social-economic order, attributable to the inappropriate behavior of the state, finance, or some other institution. 12 Alternatively, in the Simmelian narrative, it is this fully dematerialized money that is truly real money. 13 Marx s take shares the sharp distinction between metallic real money and mere symbolic money with the former gold-bug analysis, but does not see it as accidental and does not take part in their moral condemnations. 14 He shares the developmental approach of Simmel, but does not consider this developed form of money to be true money itself. 12 Thomas Nast, a German-American cartoonist, starkly depicted this view in the late 19th Century. His Milk Tickets for Babies, in Place of Milk (1876) uses the image of a hand presenting a note claiming to be milk by an act of congress to a ragdoll baby as a metaphor of the attempt to replace real commodity money with fiat money. In the background behind the doll are other notes claiming to be a house by the act of the architect, and in a quasi-magrittean gesture a cow by act of the artist. Alongside, and implicitly at home amongst, these ontological absurdities is posted a fiat dollar. See Shell (1982) and Caruthers and Babb (1996). 13 Only to the extent that the material element recedes does money become real money, that is a real integration and a point of unification of interacting elements of value, which only the mind can accomplish (Simmel, 1991). 14 It should further be examined, or rather it would be part of the general question, whether the different civilized forms of money - metallic, paper, credit money, labour money (the last-named as the socialist form) - can accomplish what is demanded of them without suspending the very relation of production which is expressed in the category money, and whether it is not a self-contradictory demand to wish to get around essential determinants of a relation by means of formal modifications? Various forms of money may correspond better to social production in various stages; one form may remedy evils against which another is powerless; but none of them, as long as they remain forms of money, and as long as money remains an essential relation of production, is capable of overcoming the contradictions inherent in the money relation, and can instead only hope to reproduce these contradictions in one or another form. One form of wage labour may correct the abuses of another, but no form of wage labour can correct the abuse of wage labour itself. (Marx, 1973, p.123). 85

100 This distinction between the symbolic and actual money has important consequences for Marx s monetary theory. Returning to a quote we discussed in the previous chapter: Paper money is a symbol of gold, a symbol of money. Its relation to the values of commodities consists only in this: they find imaginary expression in certain quantities of gold, and the same quantities are symbolically and physically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value. (ibid., p.225) Yet again Marx is arguing that despite appearances, it is real gold that determines monetary processes. The necessary condition of existence for the relationship between symbolic money and value, is the dual relationships between said money and the commodity to actual gold. Figure 3.1. Imaginary and Real Conditions of Symbolic Money Commodities = Symbolic Money imaginary Gold representation The readily observable instances of exchange made with paper money are essentially constituted by (1) the imaginary relationship between commodities and gold, and (2) the symbolic relationship between paper money and gold. The real is the condition of existence of both the imaginary measure of value and the symbolic means of circulation. Again, this insistence is not completely convincing. Following Marx s own analysis, does not the relationship between paper money and commodities itself help 86

101 overdetermine whether realization occurs, as opposed to being founded on some always already real gold money? Another complication is that symbolic money may itself be made of precious metals: Their [silver and copper coins] function as coins is therefore in practice entirely independent of all value. In its form of existence as coin, gold becomes completely divorced from the substance of value. (ibid., p.223) At odds with the notion that paper money is a deception and lie (see footnote 12 above), it is actually metallic money that Marx finds misleading. At least paper money is upfront about being a symbol. The fool is not only the person who thinks paper money is real, but the person who thinks metallic money is real: This purely symbolic character of the currency is still somewhat disguised in the case of metal tokens. In paper money it stands out plainly (ibid., p.224). The consequences of a metallic money that is actually a disguised pure symbol are quite significant. Let us consider the logic of symbolic money s relationship to the value of commodities again (Figure 3.1). The commodity is equated with an imaginary quantity of real gold. The symbolic money represents a quantity of real gold. In the case of metallic tokens, this money is actual gold itself, but it is the represented gold that determines value relations. It is important to note that this represented, and supposedly real gold, is actually absent. It plays no role other than being the essence of money. Yet, in being causally prior to actual metallic coins, the very distinction between the mere functional semblance and the actual metallic existence is undermined. We return to a familiar place. This real gold, the product of labor with value, is said to be ultimately determinant, but in each function some other type of money - the imagining of gold or the representing of gold - is actually present. Once again, we are told real gold will soon appear, in this case in money s various functions Marx calls money as money 87

102 Return of the Real: Money as Money In the section concerning money as money, we expect it to finally appear in it s real form without deferral. Marx actually describes a number of functions here with the commonality that they all in some sense represent an assertion of the ultimate necessity of real money - (1) hoarding, (2) means of payment, and (3) world money. Again, the results of his analysis are mixed and the insistence of real money produces contradictions. I ll focus primarily on the second function, and discuss the other two briefly at the end. The interesting aspect of money as a means of payment is that it insists on the need of a real money to settle accounts, but also introduces a new way for money to exist in a less-real form through the production of such accounts. Marx himself is well-aware of this tension: There is a contradiction immanent in the function of money as the means of payment. When the payments balance each other, money functions only nominally, as money of account, as a measure of value (ibid., p.235). How does real money appear as a means of payment? Marx argues that it is through an interruption of this balance of payments, a general disturbance in the chain of payments that transforms money from its merely nominal shape...into hard cash. The path for the return of real money is crisis. Crisis is required for true money to appear. Marx references data from a large merchant s use of bills and cheques as an example of how little real money enters into true commercial operations (ibid., p.238, fn.54). Marx is well aware of the contradictions in capitalism that express themselves in these contradictory aspects of money through periods of economic growth and crisis. However, he does not comment on how the analysis here contradicts his treatment of money as a means of circulation. Remember that in the latter function, we assumed exchange proceeded normally without crisis in order to show mere symbolic money was epiphenomenal. Since that realization of value was assumed, concerns about 88

103 the quantity of (symbolic) money, and its potential influence on the economy, were neutralized and the role of real gold money as the ultimate measure of value was given dominance. Given these competing treatments, the relationship between real money, normal economic activity, and crisis is at best ambiguous. From one perspective the coincidence of crisis and the return to gold money proves its reality. This perspective maintains that when things are going well mere semblances will suffice but eventually this artifice collapses and we must return to money with real value. Hence, the counter-cyclical behavior of gold shows that it remains actual money. Without critiquing these arguments here I will point out that the coincidence of crisis and some form of money is of no obvious consequence concerning the preferability or ontological priority of this form. On the contrary, the already presumed privilege of this form overdetermines both (1) its return during crisis and (2) the extent such a coincidence is convincing. The latter point is sometimes called confirmation bias; information is interpreted in a way that supports already head beliefs. With a commodity theory of money, the flight to gold in a crisis is taken as proof of its reality. However, the use of noncommodity local currencies in response to a crisis would be taken quite differently. In this case, the prevalence of its use in crisis simply confirms it is exceptional and not true money An example somewhat outside economics proper can clarify this point. Most of us have heard stories of religious conversions. In the United States, a show such as the 700 Club will often present the inspiring story of a person or couple who at their lowest point found Jesus and are now happy. This person was poor, maybe even homeless, losing all their friends on account of their drug and alcohol fueled anti-social behavior. Then they (re)discovered Christianity, embraced its teachings, and are now a completely happy and fully-devoted member of the Church. The lesson of such a story is that only a real, existing, and true deity could perform such a miracle. However, the extent to which this is a convincing story depends on a pre-existing degree of faith in truth of Christianity. Consider what happens when we replace Christianity with Scientology and imagine presenting the same story almost anywhere in the United States - I was completely miserable and alone without a dime to my name, abusing multiple drugs, but then I found Scientology, read all of L. Ron Hubbard s books and am now a completely happy and devoted member of the Church (of Scientology). In this case, because Scientology is already widely considered fraudulent, its appearance at a moment of crisis is further proof of its illegitimacy. In the case of religions we follow, we see that the power 89

104 Finally we should look at hoarding and world money. These are the two functions with the least theoretical tension in the status of real money. In the case of hoarding, Marx never even insists on its real metallic character. Instead, it is assumed that the hoarder would always seek some precious metal. This may make some sense in terms of the expected future value of a precious metal versus a non-commodity form of money, but this is essentially a portfolio decision and does not directly effect the ontology of money. Furthermore, if a hoard existed as a fund for planned or unplanned future purchases, liquidity would be important. Therefore, even in a world of possible inflation non-commodity money may help fill the hoarding function. If the hoard of stores wealth has no relationship to future use through other monetary functions (planned or otherwise), then its relevance to the essence of money is unclear. In the case of world money a series of empirical and theoretical questions could be raised. If it is money, circulating between countries, would there not exist the same natural and spontaneous tendency towards its dematerialization that Marx s has already discussed? If not, would it be more appropriate to think about world trade (to the extent precious metal operates as such) as a type pre-monetary commodity exchange and not monetary exchange proper? What are the particular conditions of existence for world money at various historical moments? Are we really to think that during international trade money falls back into its original form as precious metal (ibid., p.240) as if its stripped of its historical overdetermination, or is it more that money jumps from one particular set of social, economic, natural and political conditions into another? By definition, this concept of world money implies exchange outside the bounds of a singular nation-state. It is then hardly surprising that commodity money may play an important role historically. Theoretically speaking, this institutional detail of God overcame the stupor of drug addiction. In the case of religions we do not support, we see someone imagining things because they are high on drugs. 90

105 has little to no bearing on the logical priority of real gold money. Unless we already assume this priority, it is not apparent why the money used between borders should be taken as more essential than that used within Essentialist and Anti-Essentialist Critique By focusing on real money s contradictions and deferrals it is possible I may be interpreted as falling for the wildest theories Marx set out to criticize. Read in such fashion, the methodological and theoretical goal of knocking real money from its pedestal would produce a decidely non-marxian monetary theory. Given the complexity and diversity of Marx s own thought, as well as the thought of Marxian tradition in general, moments of contestation between different Marxisms are unavoidable. I should stress that despite this dissertation s methodological goals, it does indeed share Marx s opposition to these wildest theories that view money as a simple image/idea or symbol. The crux of the matter is that there are two basic ways of thinking about this critique. One is based on essentialism and determinism. The other is premised on anti-essentialism and overdeterminism Monetary Essentialisms and The Realist Dualism Put concisely, I understand a wild monetary theory as an essentialism of the imaginary or symbolic. Resnick and Wolff (1987) describe essentialism as the presumption that: [A]ny apparent complexity - a person, a relationship, a historical occurrence, and so forth- can be analyzed to reveal a simplicity lying at its core...essentialism is the presumption that among the influences apparently producing any outcome, some can be shown to be inessential to its occurrence while other will be show to be essential cases. (p.3) 91

106 These theories move from the appearance of money as symbolic/imaginary to the idea that money is, essentially, symbolic/imaginary. In doing so they bracket, ignore, or deny other elements of money and a monetary economy. Money is complex. It takes various forms and fulfills multiple functions. The monetary essentialisms that Marx sets out to critique are those that take this complexity, and reduce money to a singular imaginary or symbolic essence. Once this essence is established the other moments are then understood as inessential. So, for example, the reduction of money as a measure of value or wealth (two distinct concepts) to a mere image/symbol, likewise reduces the concept of value and/or wealth to a simple product of human imagination or arbitrary symbols. Returning to the concept of the realist dualism, developed in the previous chapter, such essentialisms operate on both the macroeconomy and the concept of money itself. The essence of money, its essential form and function, and the essence of the economy in general inform each other. The conceptualization of one overdetermines the other. For example, consider the neoclassical representation of an economy, taking the form of an essentialization of use-values. The economy is, essentially, the teleological circulation of commodities towards a pareto optimal distribution. Neoclassical theory does not deny the existence of other processes in the economy, but they are treated as inessential with respect to the real economy of use-values. Similarly, money s essential function is that of a means of exchange. Money can do other things, and may take various forms, but these other functions and its appearance/development through such forms are inessential products of its essential nature. The link between the essence of the economy and money is clear. In an economy that is ultimately about the exchange of use-values, real money is essentially a means to this end. 92

107 Monetary Essentialism and Marxian Theory One obvious counter to the essentialization of the imaginary/symbolic dimension of money, is an alternative essentialization of the real (material, metallic substance) dimension. Marx s writing on money, including parts of Capital discussed in previous sections, could indeed be read as such an alternative. Doing so would produce a distinct, essentialist, theory of money with a particular conceptualization of the real as the essence of money, with a real form/function from which other less essential forms/functions are derived. This theorization of money would exist in an overdetermined relationship with a broader view of the economy in general. Historically, this has taken the form of a productivist version of the realist dualism. Productivism conceptualizes the real economy as that of production, and hence essentializes forces and/or relations of production. Other aspects of the economy are secondary. Like neoclassical economics, productionism is not naive. It is not that it is ignorant of other social and economic processes than production. It merely casts these activities are secondary or inessential. According to this view, the sphere of production (with both its forces and relations) is the essential moment of the economy and society. Economic activities related to distribution or consumption are subsumed to the development of production. Productivism has multiple variants, but within the Marxian tradition value plays a critical role. It is in part because the process of production is the sole location of the creation of value that it is given priority. Marx s famous formula of capital (M- C-M ) highlights the definitive character of this acquisition of more (surplus) value. Implicit in this formula is exchange, and presumably at some point consumption of the use-value, but these are not essential. If we want to understand capital we need to understand this augmentation of value, which leads us to production. 93

108 Like the neoclassical view, this dualist treatment of the economy is related to a particular approach to money. The associated monetary theory follows what I call a real gold commodity logic. It can be characterized by four features: 1. The measure of value function is the real (essential) function of money. 2. Commodity money (i.e. gold) is the real (essential) form of money. 3. Other forms/functions, understood as symbolic or imaginary, are historically, practically, and theoretically derivative of real forms/functions. 4. The real economy, grounded in production, is considered independent of monetary processes; especially when theorizing the value of non-commodity money. This theory of money will be discussed in detail in Chapter 5. For now I want to point out that it has informed the Marxian critique of monetary economics. And as other theories of money were shaped by the corresponding realist dualisms, the essentialism found in this Marxian approach to money is in part a consequence of the productivist version of the realist dualism in its tradition Monetary Anti-Essentialism and Overdetermination Granting the possibility of essentialist Marxian counters to non-marxian theories of money, this dissertation aims at an overdeterminist alternative. Whereas the former opposes these so-called wildest theories for essentializing the wrong aspect of money, overdeterminism challenges the essentialization itself. In the field of competing essentialisms, the task of a monetary theory is to make sense of the multiplicity of phenomena through a singular essential aspect or dimension of money. In the simplest sense of the term, overdetermination works in the opposite direction. It understands any social process as being conditioned, and constituted, by the social totality. 94

109 Freud first used the concept of overdetermination in his The Interpretation of Dreams (1998) to describe the condensation of meaning in dreams. The popular understanding of dream analysis is an excellent example of essentialism. Despite the mind-boggling complexity any dream might have, analysis allows us to isolate the key feature unlocking the essential meaning of the dream. In this popular view, the Freudian approach to dreams is but a sexualized version of analysis; its essential meaning is always related to the psycho-sexual development of the subject. Freud himself warns that as a rule one always underestimates the amount of compression that has taken place (ibid., p.313) in a dream. Even a seemingly complete, consistent, and powerful interpretation of the simplest of dreams misses a multiplicity of meanings and thought condensed within it. This simplest of dreams is overdetermined by an innumerable amount of thought material. 16 Althusser is responsible for importing the concept of overdetermination into Marxian thought. In doing so he identified a non-deterministic tendency within the Marxian tradition. 17 In opposition to the identification of essential contradictions, Althusser characterizes any contradiction as overdetermined: the contradiction is inseparable from the total structure of the social body in which it is found, inseparable from its formal conditions of existence...it is radically affected by them, determining, but also determined in one and the same movement, and determined by the various levels and instance of the social formation it animated; it might be called overdetermined in its principle. (1996, p.101) This ontology includes both mutual determination and complexity. By mutual determination, we mean that any social process is both (1) determined by all other social 16 Strictly speaking, then, it is impossible to determine the amount of condensation (ibid., p.313). 17 Althusser explicitly references Lenin and Mao (1996, pp ). Resnick and Wolff (1987, Ch.2) provides a detailed history of opposition to economic determinism in Marxian theory. 95

110 processes and (2) a participant in the determination of all others. The complexity of any social process follows from its inseparability from its conditions of existence. The mutual relationship between processes is not one of simple influence (or statistical correlation); each and every process is constituted by its others. 18 Applying overdeterminism to the topic of money involves breaking with both the realist dualism view of money/economy and essentialist attempts to isolate the true form of money from amongst its multiple manifestations: Althusser s concept of contradiction emphasizes the necessary complexity of all contradictions, as against notions of contradictions that are simply dualistic opposites (Resnick and Wolff, 1987, p.88). An overdeterminist monetary theory applies this notion of complexity to both economy/money and money s own diversity. In the first case there is no independent real and monetary economy we can theorize the relationship between. Secondly, as there is no essential real economy, there is no essential monetary form/function that plays a privileged role in articulating the two sectors. 3.3 Lacan, Money, RIS Goux s Marx and Lacan In the historical exchange between the theoretical descendants of Marx and Freud, Jean-Joseph Goux has gone the furthest in developing Marx s use of the real, imaginary, and symbolic money along Lacanian psychoanalytic lines. 19 In Symbolic Economies 18 Each contains within itself the very different and conflicting qualities, influences, moments, and directions of all those other social processes that constitute it (Resnick and Wolff, 1987, p.88). 19 Because I reject any matter of fact notion of the real, we must also reject the notion that categories such as symbolic and imaginary (understood in reference to the real) are pre-theoretical. It is specifically with respect to these categories of RIS and their application to money that I m interested in psychoanalysis.this dissertation does not deal with the implications of psychoanalytic theory more broadly. I assume this would be unsatisfactory to many readers of psychoanalytic theory, since as in the Marxian tradition, a holistic notion of theory is ascribed to. I recognize and accept the limitations this very selective application of psychoanalysis may raise but must submit to the limitations of time and space in the context of this dissertation. 96

111 (Goux, 1990), he specifically uses the real-imaginary-symbolic language, but we can see this analysis at work in his The Coiners of Language (Goux, 1984) as well. In the latter, he uses the language of treasury, archetype, and token but the terms are used fairly synonymously in relation to money. Goux attributes different dominant monetary functions to these three types of money. Quoting Marx, he explains this scheme: Thus when money serves as a measure of value, the money is only imaginary or ideal money. Second, gold functions as the circulating medium or instrument. But in this function, gold can be replaced by worthless symbols of itself...third and finally - this is the order of the real - there are functions in which gold has to be present in its own golden, or silver, personality... Here the image of gold is no longer sufficient; gold must be present as real money, as cold, hard cash. (1990, pp.47-48) This in itself is fairly simple and straight from Marx; although as we have seen, Marx s use of these categories contains ambiguities. What makes the analysis here interesting is (1) the particular theorization of these categories and their interaction and (2) the use this particular Lacanian interpretation is put to. In addition to claiming money may be symbolic or imaginary, he provides a framework within which to make sense of these terms, and from which to draw theoretical implications. The implications of Goux s work relate both to money and the historical relationship between money-economy and other economies of production, circulation, and representation (literature, the unconscious, etc.). His most famous argument is that a break in realism or gold-language in modern literature occurs with a break in (inter)national monetary systems. Adopting a linguistic-semiotic approach to money with a structuralist-deconstructionist slant he discusses money after the gold-standard in terms familiar to these traditions: 97

112 Just as nominal money has value only in relation to other signs in a system, and its convertibility into a unit of intrinsic, real value is always deferred, likewise language becomes a system of pure values, with no roots in things and in no way deriving sense from the simple operation of direct designation of an object. (1988, p.20) His argument goes beyond correspondence to causation, explaining changes in 20th Century literature through this nominalization of money/language: At the same time, a break in literary form inevitably follows. To a system of circulating gold-money (and of materialized value) would correspond language oriented to a referent and thus also literature primarily concerned with the objective representation of reality. On the other hand, to a system of nominal money (that of tokens) would correspond a new conception of language and of literature, marked by the relationships among signifiers without the treasury of either a referent or a fixed standard. (1988, p.20, emphasis added) This argument is laid out in The Coiners of Language (1984). Most important for my work is not the particular claims about literature itself, but the notions of money Goux develops and the interrelationships between philosophy, semiotics, aesthetics and political economy involved in their production and presentation. 20 Bridging the linguistic-semiotic, philosophical and economic, Goux produces an ontological categorization of money based on a series of monetary trinities (1984, pp.33-37). 20 As with Rousseau (see Ch.2), if money can easily represent the representational characteristics of art, language and politics it is at least in part because money is already understood through them, and vice-versa. In the quotes above, language lacks a treasury (language understood through a monetary metaphor), but money itself is already understood as a sign, part of a linguistic-semiotic system (money understood through linguistic-semiotic metaphors). This is why, however desirable, it is untenable to police the borders as metaphors are export-imported from one discipline to the other. 98

113 Table 3.1. Goux s Registers Register Ideal/Imaginary Symbolic Real Function measure of value means of circulation store of value or means of payment Modality Archetype Token Treasury Capital I Ch. 3.1 Ch.3.2 Ch.3.3 The first column is the register of the ideal/imaginary, in which money is primarily a unit of account and adopts the modality of the archetype. The second is the register of the symbolic. In this case the modality is that of the token and the associated monetary function is the medium exchange. Finally, there is the category of the real. Here money is used as a store of value or means of deferred payment and is of the modality of the treasury. The Coiners of Language presents the argument that a shift in modalities from the archetype/treasury to the token occurred in both economy and literature. In this process value as a transcendent ideal (archetype), or brute reality (treasury), is abandoned for a world of purely relational symbolic values. The analogues are clear but the causality is not. Unless we assume some sort of economic determinism we are left wondering how these economic and literary changes can be causally related. The epistemological condition of existence for Goux s narrative is not an economic determinism proper, but rather a determinism of symbolization. The force behind this determinism follows from the conceptualization of each major facet of social life as yet another process of symbolization. Hence his concept of numismatics, usually reserved for the object of coins, takes it aims at economics, politics, philosophy, and religion. We may therefore speak of a logic of the symbolization process, that is, a logic of the successive forms taken by the exchange of vital activities in all spheres of social organization, a logic pertain to phylogeny as well 99

114 as to ontogeny. This logic enables us to conceive the dialectic of history. (Goux, 1990, p.24) The principal concern I have with Goux s conceptualization of history is that it produces a dematerialization narrative concerning money/economy. It is also not a coincidence that it advances the orthodox Marxian view of history by replacing the essentialism of production with one of exchange. However, it is dematerialization that I want to flag as problematic. By a dematerialization narrative, I refer to a historical story of money that emphasizes the movement from physical material forms to less material, and ultimately purely imaginary/symbolic, forms. Such a notion is clearly present in Goux s characterization of the sign of the bank transaction, with its abstraction, dematerialization, and nominalist structure, which defer convertibility to the point where it becomes imaginary, (ibid., p.130) as well as the argument of The Coiners. From a historical perspective, the problem with these narratives is that the excessive exoticization of new monetary processes as ephemeral involves the excessive reification of of earlier monetary processes as concrete and/or natural. Methodologically and theoretically, such stories accept the categories of RIS as consistent, non-contradictory, and stable. Hence, we could have a monetary economy premised on a truly real/imaginary/symbolic form of money, or imagine that money was at a given time consistently one, and has now completely become an other. From an overdeterminist perspective, the categories of RIS do not describe stable and distinct categories. Because the various dimensions and aspects of money always overdetermine one another, changes in monetary processes are understood as shifts in the overdetermined articulation of these elements and their conditions of existence, rather than shifts from one type to another. For this reason, even if we accepted a commodity origin of money, a fairly big if in my estimation, overdeterminism would still object to the dematerialization story. 100

115 To a certain extent, Goux expresses sentiments similar to this overdeterminist critique: These distinct registers of the monetary object are interwoven, unraveled, and by turns subordinated to one another according to the prevalent regime of exchange...these three ontological registers can be neither separated nor fused in their principle, but are variously arranged and intertwined in what we mistakenly lump together under the single rubric money. (Goux, 1984, p.89) While his insistence on the inseparably interwoven or intertwined character of these registers (RIS) is consistent with overdeterminism there are a few elements of his analysis that lead him away from producing an overdeterminist theory or narrative. First, despite the insistence on their articulation, Goux nonetheless maintains a consistency of these categories or registers. In our reading of Marx, we saw how in each monetary function, we saw money as complex and contradictory. Money as a measure of value is both real, but also imaginary, only to be realized by money as a medium of circulation. This new form of money realizes commodities, but is actually a symbol. Finally, even when money acts as money, in the form of real money itself, complications arise. Hence, each monetary function, and associated form, presents itself as both real but also as something other. This shows that not only does each function/form/dimension overdetermine the other, but that they are only in themselves the contradictory condensation of this overdetermination. Notice how different Goux s acceptance of measure of value, medium of circulation and money as money as imaginary, symbolic, and real, respectively, is from my emphasis on the difficulty Marx has in making these descriptions. Second, following from the previous point, if Goux can think of these dimensions as consistent in themselves, he can also imagine their subordination or domination with respect to the others. Therefore, even if each and every monetary system or 101

116 process is always interwoven we can think of different systems or processes as being more or less real, imaginary, or symbolic. There is no pure symbolic money, but we can move from dominantly real toward dominantly imaginary/symbolic articulations. However, from an overdeterminist perspective, since money s multiple aspects are constituted through a process of overdetermination, the question is not the degree to which various pre-existing elements influence/cause/determine one another, but rather the character of this overdetermination. Goux s primary use of psychoanalysis is to translate the figures of symbolization from one domain to another. In doing so we can speak of historical developments spanning political economy, sexualization, and the state. While his understanding of RIS is nuanced and open to overdeterminist interpretation, its usage precludes a true abandonment of the binaries of real and less-real money A Simple Outline of the Lacanian RIS In this section I will present an outline of the three registers Lacan used in his understanding of the psyche. My method of exposition will begin with each register in its most simple form, and then introduce complications. These complications are critical because they are largely what makes this particular conceptualization of the RIS attractive for an overdeterminist theory of money. The reader is asked to keep in mind that some of the initial descriptions are subject to qualifications, revisions or transformations as we proceed Three Registers The real is impossible (Lacan, 1981, ch.13). The real is the register of the presocial and pre-symbolic. It is akin to a state of nature. The real, as pre-discursive, can not be expressed or approached through language. This does not imply it is abolished by language. The register of the real corresponds to the concept of need, a purely biological and animalist requirement. Of course, the common reaction to this 102

117 notion of a pure need is its impossibility, which is precisely the motivation for Lacan s notion of the real. The imaginary register is characterized by a notion of wholeness. This is presented in Lacan s mirror stage, in which the still uncoordinated child receives from the mirror an image of organic wholeness in the form of a single unified body (ibid., pp.77-78). Whereas the I of the real is an assortment of pure needs, the I of the imaginary is a consistent whole. However, we should note that this whole is dependent on the image of the other. It is in this sense that the register of the imaginary transforms needs into demand. The key attribute of demand, in the Lacanian sense, is that it is addressed to an other. Animalist hunger simply exists. Demand always implies the inclusion of an other who would/could fulfill this demand. The symbolic is the register of language. Compared to the subjects of the real and imaginary, the symbolic subject is constituted by a network of words, names, and laws. It is for this reason that Lacan has long been understood as the structuralist of psychoanalysis. If this register operates through signifiers, then the logic of the signifier, with its well-known Saussurean arbitrariness and structural determination, can be applied to its study. This subject of the symbolic is no longer a simple organic whole, but a particular Name Surname related to various other Names in particular ways. However, detailed such identifications may be they are also unsettling due to the logic of the signifier. Yes, I am this or that but what does that really mean? Who am I really? 21 By expressing a demand through language, it becomes a desire - unattainable because it is subject to signifier. 21 Our most fundamental identification is perhaps the name. But for the vast majority of individuals there is absolutely nothing personalized in this identification of our person. Growing up, there was almost always another Joe around. Althusser was troubled by being named after his dead uncle. Am I myself (Louis), or just some replacement for another? Yes the name includes us into symbolic network, such as the family, but it also has an alienating effect - Louis was not really Althusser s name; it was the other Althusser s. Of course, uniqueness is no solution for the activity of the signifier. Now that my class rosters include very few students named Joseph, or variants thereof, I can fret about where I fit in. 103

118 In a certain sense need, demand, and desire (corresponding to the RIS) all fail in some respect. There comparative failures can help elucidate the differences between these registers. Hypothetically speaking, need could be satisfied. It fails in the sense that once a need is transformed into a demand or desire this simply animalistic satisfaction is no longer available. Once we enter the imaginary/symbolic need is always transformed. The 21st century stock broker may have real needs, but once approached become demand/desire. The imaginary demand fails because nothing in the other can grant us the complete, organic unity of the ideal image. The demand from the other must take the form of language - there is no demand that does not in some respect pass through the defiles of the signifier (Lacan, 2006, p.297). Finally, desire can not be satisfied because it takes on a life of its own through language. More precisely, desire is itself this failure of meeting a need or expressing a demand without the subverting influence of the symbolic Complication I: Before and After the Letter The first qualification we should address concerns the real. While the simple presentation takes the real as impossible, this status follows from its pre-social character. It is because the real is pre-symbolic, in particular that which could/would not be symbolized, that it can not be approached after one s inclusion into the social network of symbols. If we were to apply this concept of the real to monetary theory, we would likely produce a dematerialization narrative - we once had real money but with the development of the economy of the signifier such money is unattainable. We see some of this in Goux in the sense that the period where real money was hegemonic preexists the rise of the symbolic. What such an application would miss is the crucial distinction between the real before and after the letter. The real, if unapproachable, is not without its own effects. The real is excluded from the chain of signifiers making up our symbolic, but [t]he chain is unequivocally 104

119 determined by what it excludes as by what it includes (Fink, 1995, p.27). This real, as a presymbolic entity that is excluded, but continues to make itself felt through subverting the normal functioning of our symbolically constituted subjective reality (i.e. Freudian slips), bears some resemblance to a real gold commodity money. Remember that Marx spoke of gold s absence during normal business operations. Gold money is excluded in the development of symbolic fiat/credit money, but it nonetheless (1) provides the crucial link between money and value and (2) ultimately reappears in the traumatic outbreak of crisis. A key assumption of this conceptualization is the equivalence of the real before symbolization and the real that re-emerges after symbolization. In other words, there is no distinction between the real before and after the letter. However, as Fink argues, Lacan is actually concerned with two different reals: The first real, that of trauma and fixation, returns in a sense in the form of a center of gravity around which the symbolic order is condemned to circle without ever being able to hit it. It gives rise to impossibilities within the chain itself...and creates a sort of lump that the chain is forced to skirt. (ibid.,p.28) The second, or after the letter, real is this lump. It is excluded from the symbolic because it is in part constituting by the contradictions and tensions in the symbolic itself. Let us consider an individual with a profound case of writer s block. The individual searches for the singular cause behind the block. What is the real source of this subversion of my normal mental functioning? Eventually the cause (X) is stumbled upon, and the individual s productivity and mood improves dramatically. The realist interpretation of this story is that X causes a problem, but was later identified and dealt with. That treating X (talking about it or coming to terms with it) lead to recovery supports the claim it was the problem. A Lacanian, and overdeterminist, 105

120 interpretation would treat such claims with skepticism. It may be the case that X appears as the original real cause to the subject, but this appearance itself is the overdetermined. This same skepticism is to be applied to monetary phenomena. One of the consequences of the crisis beginning in 2007 was a broad questioning of economic institutions usually taken for granted, including money. A rush to gold, and the associated rise in its price, has been interpreted by some as proof of its reality. Real money was gold. It was excluded from our economies in the rise of symbolic unbacked fiat money, but is now staging a comeback. As the modern world of symbolic fictionalized finance fades away through its disfunction, gold begins to reassert itself as the real form of money. This story conflates the real before and after the letter. While gold has the same atomic structure as it did in the 18th and 19th centuries, the gold we see advertised on TV today and read about in history books are not the same thing. Among the overdeterminants of this current revival of gold include financially squeezed households trying to trade in jewelry at the mall for some extra cash, television advertisements, a financial crisis in which trillions of dollars of real wealth vanished, popular political resentment of the anything federal (including the Federal Reserve), a lack of a boom industry to invest in, news television shows predicting Weimar Republic or Zimbabwe style inflation in the United States 22, and a flight to quality with incredibly low yields on US bonds, to name just a few. This is not the gold of England In other words, the supposed return to real money is itself an overdetermined product of our fictional monetary-financial system. 22 See Peter Schiff on the Glenn Beck Program 10/13/2008 ( jb9fuivkslw) as well Fast Money 12/22/2009 ( 23 Which has its own fascinating and complex overdeterminants. 106

121 Complication II: The Knot The second qualification of our RIS scheme involves the relationship between the three. Lacan uses the borromean knot as a topological model for this relationship (1982, Ch.7). The standard borromean ring consists of three independent rings knotted together. Figure 3.2. Borromean Rings The tie between any two rings depends on the other (third) ring. No single pair of rings (blue and black, red and black, or blue and red) are connected in themselves. It is only in the totality of relations that this knot is constituted. We can think of the RIS in similar terms. While we may speak of real, imaginary, and symbolic registers or moments, they always exist in mutual overdetermination. Without one, the others fall apart. 3.4 A Marx-Lacan Framework for Monetary Theory From Marx we receive a theory that links monetary phenomena to value, but contains ambiguities concerning the relationship between money s multiple forms and functions. I have argued that these ambiguities may be domesticated through the production of an essentialist Marxian theory of monetary process grounded in the logic of real gold commodity money. I have also asserted that an alternative Marxian theory, premised on overdetermination, is possible. Such an approach would - despite the seemingly essentialist language of real, imaginary, and symbolic - take these 107